According to the December Property Flipping Report by CoreLogic, “flipping” is a term used to describe short-term property trading, where a buyer purchases a home with the intent of reselling the property in a short time frame (generally one or two years) for a profit.
“Although the proportion of ﬂips at a loss has declined from recent highs in 2009 and again in 2012, there has been a clear increase in loss-making ﬂips recently,” the report said.
“The rising number of loss-making ﬂips highlights [that] there is some financial risk in ﬂipping, keeping in mind that the proportion of loss-making ﬂips on a net basis is likely to be substantially higher once expenses are taken into account.”
CoreLogic found that over the 12 months to June 2017, 10.9 per cent of ﬂips held for less than 12 months were at a loss, and 10.1 per cent of ﬂips held for between 12 and 24 months resold for a loss.
Interestingly, the report found that the introduction of the capital gains tax discount for investors that held properties for more than 12 months in 1999 made little diﬀerence to ﬂipping behaviour.
CoreLogic warned that while there are many examples of profitable ﬂipping, it’s important that anyone considering this strategy understands the costs involved.
“Transacting real estate is an expensive exercise. Successfully ﬂipping a home involves more than simply selling the property for more than it was purchased for.
“In order to make a profit, flippers will need to recoup their transactional costs, such as stamp duty and conveyancing, as their selling costs such as marketing and real estate agent commission. There is likely to also be interest payments on the debt.”
Sydney and Melbourne were the most profitable capitals for flipping, while Darwin was the least profitable one.