Older, tired-looking two-bedroom units are getting a new lease of life as flippers, who previously focused on reviving standalone three-bedroom homes, realise there’s also money to be made in the cheaper stock.
Property traders are now snapping up older ex-rental units for about $300,000, transforming them into modern apartments and flicking them off for a profit.
Flippers returned to the market last year when they discovered a profit could be made by renovating tired three-bedroom homes and reselling them to first-home buyers, and now they have their sights on set the two-bedroom market too.
Nationally the number of properties resold in 2022 after being held for less than a year dropped to just 1.5% in 2023 from 2.6% in 2022, CoreLogic data shows. However, Auckland and Christchurch had slightly more shortholds than the national average with 1.7% of Auckland properties bought and sold within a year compared to 2.7% in 2022 and 2.1% in Christchurch from 3.6%. People buying and selling within a year could be flippers, but may also have sold within a short period for any number of reasons.
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Bayleys listing agent Angela Webb is selling a handful of units all over Christchurch on behalf of landlords who have owned them as rental properties for 10 and 20 years, and said most were being bought by property traders in the $300,000 price range to do up and on-sell as “modern apartments”.
“We have sold a number of them and some of them have been sold to flippers who are in the process of renovating them and none of them have come back on the market yet, but we are expecting they will.”
Flippers are showing interest in a two-bedroom, one-bathroom unit at 1/30 Collingwood Street, in New Brighton, which has an RV of $430,000 and had its deadline sale brought forward to last Thursday.
A two-bedroom, one-bathroom unit on Suffolk Street, in Linwood, which sold at the end of last year for $360,000, is in the process of being pulled apart and put back together before Webb expects it to reappear on the market again.
Some of the buyers were tradespeople doing it after hours, while others were doing it as their full-time job, she said.
“Some are just buying to live in, but there have been a number of sales to people who are going to do them up and sell.”
The properties, which could also be found in Woolston and Inglewood, were usually in original condition and the only changes made had been to meet the rental rules so were calling out for a full renovation.
A two-bedroom unit on Suffolk Street, in Linwood, was bought for $360,000 at the end of last year and is currently undergoing a full renovation. Photo / Supplied
The renovations usually cost at least $50,000 and include replacing the dated kitchen like this one in Suffolk Street. Photo / Supplied
The end sale price depended on the quality of the renovation, she said, but those done well appealed to people in their 20s looking for their first home.
“They’ve got to be done to quite a high standard to achieve a really good price these days. We are talking double glazing, new kitchen and bathroom with tiled areas. People expect quite a high standard and very modern and sleek.
“They are still very affordable in Christchurch – a renovated one is still under $500,000.”
The property traders plugged a gap in the market, she said, because bank restrictions prevented most first-home buyers from buying properties with over $5000 deferred maintenance.
“The day of the first-home buyer being able to do in and buy something that needs grossly renovating is long gone as well so this is kind of where this secondary market has opened up for flippers to buy, renovate and sell on to first-home buyers.”
Ray White Manukau co-owner Tom Rawson said in 2021 people were just buying and flipping properties without doing anything to them. That stopped in 2022, but property traders started returning to the market last year when they realised there was a profit to be had on renovating and reselling them again.
Bayleys Canterbury investment sales specialist Angela Webb says property traders are plugging a gap in the market. Photo / Supplied
Ray White Manukau co-owner Tom Rawson says property traders are picking up older stock from investors who have decided to sell rather than renovate their rentals. Photo / Fiona Goodall
Rawson said they usually picked up older stock, mainly being sold by investors as tenancies ended and they decided to sell instead of carrying out the work to bring it up to standard.
“Ultimately the first-home buyer isn’t the buyer for it because it needs too much work so there’s a percentage of the housing stock out there that does require renovation before it can be bought by a family.”
However, Rawson said the profit margins weren’t as high as they might first seem because after the cost of renovation and costs including tax and GST what might initially look like a $100,000 profit might only be $15,000.
“There’s definitely a market for it and it’s a noticeable increase in those people being around, but there’s also an increase in those people who don’t want to do the work themselves so are happy to let it go to that person.”
Rawson said property traders had traditionally bought three-bedroom, one-bathroom homes, but recently had been branching out to two-bedroom units. The larger two-bedroom properties where they could add an extra bedroom without much structural work were particularly popular.
The two-bedroom properties usually fell within the $600,000 and $750,000 price point in South Auckland, which was where a lot of first-home buyers were looking.
“If we put a property on and it’s within that price point, there’s a lot of activity. The further away we get from $750,000 – higher – the less the activity is, just affordability comes into play.”
A two-bedroom brick unit on 1/27 Avis Avenue, in Papatoetoe, with original floral carpet is being auctioned later this month and has an RV of $780,000.
Meanwhile, two other neighbouring units – one a renovated two-bedroom unit and the other an original four-bedroom unit – at 68A and 68B Rowandale Avenue, in Manurewa, are also up for grabs. The renovated two-bedroom unit sold for $512,000 in September last year and is now asking for enquiries from $599,000, while the larger but shabbier unit is being auctioned early next month.
A two-bedroom unit at 68B Rowandale Avenue, Manurewa sold for $512,000 in September last year. Photo / Supplied
That same property, 68B Rowandale Avenue, is back on the market after a full renovation and is seeking enquiries over $599,000. Photo / Supplied
The properties have different owners and coincidentally have just been put up for sale at the same time, but Rawson said it was a good example of what they look like before and after a renovation.
“It will probably sell for similar money to the one that needs doing and has the extra bedroom there.”
Lodge salesperson Chase Gray said there was also an increase in flips happening in Hamilton.
Traders are buying properties such as ex-rentals or homes where people have lived in them and done nothing to them for 10 years for between $400,000 and $600,000 and transforming them into beautiful liveable homes, he said.
Gray has one main property trader he works with and said they had been noticing they had been coming up against a lot more competition for these do-ups. Young builders were also buying them both as their first home and a project they can do up and sell to get capital when they buy a second home in a few years.
“You are selling them to a first-home buyer that doesn’t have the skill or the knowledge to do the renovation themselves. So, they are selling pretty much a brand-new product in an established area to a first-home buyer and get them a nice house first off.”
Recent examples of properties listed on OneRoof include three-bedroom, one-bathroom houses that have been picked up in the high $400,00s or low $500,000s in suburbs such as Fairview Downs, Maeroa, Fairfield and Frankton, have been renovated and then put back on the market with asking prices in the mid to high $600,000s.
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