Returns from flipped properties increase in 2020

Home News Mortgages Returns from flipped properties increase in 2020

ARCHIVED ARTICLE This article was correct at the time of publication. It is now over 6 months old so the content may be out of date.

Michelle Monck

Consumer Finance Expert

Published: 23/11/2020

2020 is set to see the highest percentage of homes bought and sold within 12 months since 2008, according to data from the Land Registry and Hamptons International. Its estimates suggest around 23,000 (2.5%) of homes will have been flipped by the end of the year.

What is a flipped property?

A flipped property is when a property is bought and sold within 12 months. Properties are often flipped as investors look to redevelop properties in order to generate a return. The average profit in 2020 from flipped homes in England and Wales is £40,995 an increase from £29,685 in 2019. This increase in profitability is because of a switch made by investors from flats to more houses. After the first lockdown ended and the housing market reopened, the percentage of flats being flipped reduced from 20% in 2019 to 5% now. Investors were quick to respond to changes in demand from buyers that now wanted larger properties for home-working and with outside spaces.

Properties in the north continue to see the greatest number of homes flipped, with six of the top 10 places for flipping located in the north. It has been two years since properties in the south of England entered the top 10 most flipped locations and reflects the effect of stamp duty on profitability on more expensive properties in the south (even allowing for the stamp duty holiday).

Commenting Aneisha Beveridge, head of research at Hamptons International, said:

“Flipping generally involves buying, renovating and selling a home over a short period of time, in most cases for a profit. Flippers play an important role in the housing market by improving housing stock and taking on projects other buyers often won’t touch.

“Since the market weakened following the financial crash of 2007, the number of flipped houses dwindled. However, in recent times their numbers have started to recover. But the introduction of the 3% investor stamp duty surcharge has served as a cap, with flippers increasingly targeting cheaper areas where they don’t have to pay stamp duty. At the same time, tightening yields and increased regulation have pushed some landlords away from long-term ownership towards buying, refurbishing and selling on.

“Burnley has cemented itself in the top spot for the last six years as it’s one of the few places where investors can purchase a home without paying any stamp duty. And while the current stamp duty holiday will see flippers across the country save money, its full impact won’t be felt until early next year when these homes are likely to return to the market for sale. Given investors in more expensive areas will see larger stamp duty savings, there is potential for Burnley to be knocked off the top spot before too long.”

Is now a good time to invest and flip a property?

Those looking to purchase a property with the aim to sell this for a return will need to consider if they can complete their purchase before the end of the stamp duty holiday at end March 2021. Properties available at auction and those with no chain involved should be quicker to complete. Those investors wanting or needing to use finance to buy a new property should be aware of the time it could take to complete using a mortgage. Lenders can vary between 10 up to 26 weeks to complete a mortgage due to levels of demand and backlogs from the first lockdown. Alternatives that could be quicker include:

A remortgage of an existing property that is usually around six weeks for cases with no complications
A secured loan on an existing property, current average completion times are 11 days according to data from Loans Warehouse
A bridging loan where completion times are fast, but rates may be higher.

A good broker helps borrowers to identify if the lender they need for a mortgage can complete in time for them. Moneyfacts has preferred brokers for remortgages, secured loans and bridging loans.

Those looking to get a mortgage right now to purchase a property can also benefit from continued low mortgage rates. For example, data from Moneyfacts shows the average two-year fixed rate mortgage was 2.44% in November 2019 compared to 2.42% now. Eleanor Williams, finance expert at Moneyfactscompare.co.uk said:

“After dropping to record lows in July, the increases we have seen in the average mortgage rates seem to have slightly slowed of late, therefore those hoping to secure a competitive mortgage deal may find this an opportune time to explore their options. The mortgage sector remains a fluid landscape, with lenders making updates to both products and criteria with great regularity, so seeking the support and up-to-date market knowledge of a qualified, independent adviser could be vital in selecting the right product for their circumstances.”

Disclaimer

Information is correct as of the date of publication (shown at the top of this article). Any products featured may be withdrawn by their provider or changed at any time. Links to third parties on this page are paid for by the third party. You can find out more about the individual products by visiting their site. Moneyfactscompare.co.uk will receive a small payment if you use their services after you click through to their site. All information is subject to change without notice. Please check all terms before making any decisions. This information is intended solely to provide guidance and is not financial advice. Moneyfacts will not be liable for any loss arising from your use or reliance on this information. If you are in any doubt, Moneyfacts recommends you obtain independent financial advice.

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