The profile of people buying tired old houses to do up has changed over the past few years with some agents saying young couples desperate to get on the housing ladder have cut out the more traditional ex-tradie house flippers.
House flipping is not so prevalent because it’s much harder to make a profit, others say, because the cost of housing has risen so high, plus flippers are now taxed following the introduction of the Brightline test.
To top that off, council consents can quickly run into many thousands of dollars and the cost of the renovations themselves can be huge.
Philip Hall, of Ray White Ellerslie, thinks the flipper profile changes from one part of Auckland to the next.
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“Around the Mt Wellington, Ellerslie area, for example, you used to see professional blokes who made a business out of doing it and they’d be like an ex-builder or sparkie maybe and they’d be like ‘I can make a career out of this’.
“What they would do is go around and buy one, do it, buy one, do it.”
Over time the areas have become more affluent and now there are young couples prepared to pay more for the houses than the flippers.
“They come in and they’re seeing it as an option to buy an affordable home in the area and they’ll live in it for a year or so and use it as a stepping stone to move on to the next one, so round our area you don’t see people flipping houses like they used to.”
His patch used to be a big investor area and flippers would come in, buy investor properties such as boxy units which they would put into separate titles and sell off, or buy old houses off investors, do them up and sell them.
Instead, young people are buying the house, replacing the fence, replacing the kitchen and knocking a hole in the wall to put in French doors, he says.
“A lot of them have that drive or skill set to try and fulfill what they want to do. Some of them just have a tie or friends in the industry so they can get things at a better rate.
“Other ones just have this vision where they say ‘yep, we want to stamp our mark on something, live in it for a while and then on-sell it in the future and make some money.”
They are often not first home buyers but on their second or third home, Kooger says.
There are still those, however, who go into house flipping as a profession, despite having to pay tax on their profits.
Kooger had a client who was a builder with a plan.
“He was a young fella who said ‘it’s my plan to do two to four of these a year’. That was part of his business model.”
Any entity, such as this man’s, doing up a house a vested interest to sell and make a profit within five years of buying it should pay tax, he says.
“Back in the day a lot of people built up their funds or their future by flipping without ever paying tax so that’s kind of closed that loophole, of actually saying you are making a profit as a business sector venture, you should be paying tax on that.”
A Kingsland agent, who didn’t want to be named, believes not just the Brightline test but law changes around what constitutes a trader and ensuing GST requirements had also contributed to fewer house flippers.
“Because previously people could have just dabbled in it. Now, it’s quite a decision because you’re going to be paying for any profit you make if you’ve bought with the intention of on-selling it for a profit.
“I think what it’s meant is people are doing it seriously or not really at all.”
The sheer cost of housing was also a turn-off for people considering doing a house up for profit.
“You’re not really buying something for a song, are you? If you’re looking at a do-up, people are wearing a lot of debt for a period of time to do that.”
