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Home / Business / Companies

Flipping heck: Speculators made $2000 a day

By Lane Nichols
Reporter & Deputy Head of News·NZ Herald·
21 Mar, 2017 04:00 PM4 mins to read

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Industry watchdog Real Estate Agents Authority revealed this month that it had reviewed 300 cases of rapid on-sells. Photo / File

Industry watchdog Real Estate Agents Authority revealed this month that it had reviewed 300 cases of rapid on-sells. Photo / File

One investor makes almost $1m in a day as speculators cash in on housing growth.

Speculators flipping properties on Auckland's rampant housing market pocketed $70,000 per transaction last year - nearly $2000 a day.

One investor walked away with almost $1 million after an Otahuhu house sold twice in one day for nearly double the initial purchase price - the biggest instant payoff of 2016.

New figures obtained by the Herald from property data analysis company CoreLogic show nearly 300 Auckland homes were on-sold for profit last year within three months.

They gave local speculators a total capital gain windfall of $25 million and daily profit $1848.

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Nationwide, more than 450 properties changed hands in quick-flick sales, with a total before-tax profit of $35m.

And though the number of properties flipped by savvy investors is down on the heady years before the global financial crisis, the short-term profits on offer have doubled thanks to surging house prices in our biggest city.

The data also shows the Government's "bright line test" appears to have had an effect by further cutting the rate of flipped homes.

The test was introduced in October 2015 to crack down on speculators by taxing profit on any investment property bought and sold within two years irrespective of the seller's intention.

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However, the prospect of huge profits for investors willing to take a punt had failed to stamp out the practice altogether, CoreLogic said.

"Given the recent pace of price increases and high value of properties in Auckland there is clearly still the ability to make short-term profits for those people willing and able to take the risk," CoreLogic senior analyst Nick Goodall said.

"And there is always a risk with property. What we haven't detailed here are those who lost money on short-term sales."

Herald investigations have revealed many examples of investors flipping homes for huge short-term gains - often on the day of settlement without ever taking possession.

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They include a family of seven's Papakura house, sold twice in one day with the on-seller pocketing $81,000 instant profit; and two adjacent Mangere Bridge properties that were sold five times in four days with their collective values surging by more than $500,000 in under a week.

In response to growing public concern, industry watchdog the Real Estate Agents Authority revealed this month that it had reviewed 300 cases of rapid on-sells to check whether agents had met their legal obligations.

It is also introducing technology to instantly track when properties have been flipped for big mark-ups.

Labour's housing spokesman, Phil Twyford, said the latest figures showed how out of control the Auckland housing market had become. "Flipping is the tip of a very big iceberg of property speculation. It's insane that so much money is being made by people flipping houses like this.

"It underlines the need for serious policies that will rein in rampant property speculation."

Twyford said Labour would end tax breaks for property speculators, extend the bright line test to five years and hugely increase housing supply.

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Revenue Minister Judith Collins would not comment on CoreLogic's figures, but said anyone speculating on residential property was already subject to the intention to make profit test.

The bright line test had further strengthened this measure to ensure property investors met their tax obligations.

"Therefore, people buying and selling a residential property within a short period will come to IRD's attention and correctly pay tax on any gains they make."

New disclosure rules introduced in 2015 meant anyone buying or selling land had to complete a land transfer statement. This enabled IRD to match property information with taxpayer data, "thus allowing IRD to determine whether a taxpayer has taken the correct tax position on their property transaction".

She added that the Government had allocated $29m over five years in the 2015 Budget to improving tax compliance in the property sector.

Asked whether the bright line test had had the desired effect, Collins said: "IRD has not yet received all tax returns for the 2015/16 tax year. Once this data is received we will be able to measure the impact of these changes."

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What they made

$70,000 - average profit speculators made flipping Auckland homes during 2016
$25m - total profit from flipped Auckland homes
$1848 - daily amount pocketed by Auckland speculators
$35m - total profit from flipped homes nationwide
$1479 - daily amount pocketed by investors nationwide
466 - number of homes flipped nationwide for profit within three months of purchase - 0.5 per cent of total sales
285 - number of Auckland homes flipped for profit within three months of purchase - 1 per cent of total sales

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