It seems like, gone are the days when you could make some serious cash flipping homes.
In today’s market, with increasing house prices and even higher construction prices, unless you’re a tradie, you’re looking at seriously slim profits if you want to turn a quick profit.
With the fastest annual growth since 1989, rising 18.4 per cent in the year ending August, the residential construction sector is booming!
Creating a difficult scenario for flippers who were once able to buy a home for below cost, and with a small investment, can flip the home for a healthy profit. With homes now selling well above their price guides and longer wait times for contracting builders and tradesmen, as well as an increase in several associated costs. It’s not a viable option right now.
Instead, buyers are more likely to gain a profit just from holding a house instead of renovating and selling in a short amount of time.
O’Gormon and Partners Real Estate agent, James O’Gormon said that flippers are focusing on homes in Sydneys Lower North Shore where there are a few homes, within profit margins for flipping, but properties are selling at a premium regardless.
“It’s almost getting to the point you’re better off buying something that is all done.” “The challenge with the flippers at the moment is prices are racing forward so quickly they can’t see the margin in it.”
With building costs increasing from 20-40%, and $1million dollar property would end up costing $4 million -$4.5 million after renovating, meaning that there is a certain point where even some of the most profitable flippers will tap out at a certain level.
So until conditions change in their favour, the best strategy in today’s market is to buy to hold or, as we like to say, it’s not timing the market, but time in the market.