The number of property speculators buying and selling homes over a short period of time has reached its highest level in a decade.
“Flippers” turned their attention to previously unloved, cheaper regional markets after stamp duty rises made quick turnrounds of expensive London homes less appealing.
Some £5.5bn of homes across England and Wales were bought and sold more than once in the year to April, or 30,822 houses and flats, according to Countrywide, the estate agency, which analysed Land Registry data. These were the highest figures since 2007, a high point for housing speculation, when £9.6bn of homes were “flipped”.
The shift points to investors losing confidence in the potential for price growth in London and the southeast, where prices had shot up in recent years. Instead they believe lower- priced areas are going through a market recovery, offering the potential for quick gains. Burnley in the North West saw the most activity in the year to April 2017, with almost one in 10 homes that were sold during the year in the Lancashire town changing hands more than once.
Only two of the top 10 areas for house “flipping” were in London — the borough of Newham and Waltham Forest on the capital’s outskirts. Burnley in the North West saw the most activity in the year to April 2017, with almost one in 10 homes that were sold changing hands more than once © Dreamstime This was in stark contrast with a year earlier, when all but two of the top 10 were in London, including high-value areas of the capital such as Kensington and Chelsea and Westminster, where homes typically cost well above £1m.
“There has been a big shift away from London and towards placesewhere prices are growing a bit more. It is a story about where people think prices will grow,” said Johnny Morris, research director at Countrywide.
“It’s about the recovery in the housing market outside the south of England — the market in the Midlands and north has picked up in the last 18 months or so, making this more attractive and more financially viable for people to do.”
House prices in the capital rose by only 2.6 per cent in the year to June, according to Hometrack, compared to a national rate of 4.6 per cent. London has been outstripped by regional markets such as Manchester and Leeds. Mr Morris said most investors flipping homes carried out some form of renovation, although given the rapid timelines involved, this often consists of fairly modest work such as interior refits or a small extension.
“There is almost a cloud that hangs over people who buy and do up property, but actually they are taking old, tired housing stock that needs work and getting it upgraded,” he said. Investors planning to flip properties are likely to have brought forward some purchases in an effort to avoid a 3 per cent stamp duty surcharge introduced last April for second and additional homes, he added, giving a boost to the recent figures. “In the long term, [the surcharge] is going to drag on people flipping and renovating, as it adds that extra cash barrier.”
An earlier overhaul of stamp duty in late 2014 cut the charge for most homebuyers but increased it for those purchasing homes worth more than £938,000, dampening the central London market. Other popular “flipping” destinations in the year to April 2017 were Reading in the South East, where 6.7 per cent of homes changing hands were flipped, and Middlesbrough and Hartlepool in the north-east.
Homes in these areas are “relatively affordable, particularly when you take into account the cost of debt and how low interest rates are”, Mr Morris said.
The lower prices also help investors to escape big stamp duty charges. Overall, levels of speculation in the housing market have not so far returned to those of the mid-2000s, a heyday of property investment. In every year from 2002 to 2007, more than £6.5bn of homes changed hands more than once. “That was a mix of rapid house price growth, freely available credit and enough confidence in the market and economy that it was worth taking the risk,” Mr Morris said.
Source: Financial Times
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