The renewed pandemic-induced enthusiasm for flipping properties went into reverse during 2023, with the number of homes being bought and then swiftly sold on last year, fall to a record low.
People who flip properties will typically buy a run-down home in need of renovation, refurbish it and then sell it on for a profit. The trend peaked in 2007, when 3.7% of all homes sold in England and Wales – equating to 52,950 properties – had been purchased within the previous 12 months.
Numbers fell during the financial crisis but were rising again in the years leading up to the pandemic on the back of rising prices. By 2019, 2.3% of the homes sold in England and Wales had been flipped, translating to a total of 24,010 properties.
The numbers of flips fell initially during Covid due to an overall drop off in sales, but they rose again on the back of low mortgage rates and the stamp duty holiday. In 2022, 2.3% of homes sold in England and Wales had been purchased within the previous 12 months, which was back to 2019 levels. In terms of the number of homes flipped in 2022, the 26,340 total was the highest figure since 2007.
Things have changed a lot since then. The cost of building materials, which had already increased significantly during the pandemic, spiked dramatically after Russia’s invasion of Ukraine in February 2022. This, combined with the rapid increase in mortgage interest rates, a slowing property market and price falls have made successful flipping much more difficult.
Only 1.7% of homes sold in England and Wales in the first three quarters of 2023 had been bought in the 12 previous months, according to our analysis of the latest available Land Registry data. In terms of numbers, only 9,770 homes were flipped in the first three quarters, the lowest figure since our records began. For the whole of 2023, we estimate there will have been 16,600 flips, the lowest number in a decade.
Much like in previous market downturns, profit margins were squeezed for anyone flipping a property last year – falling prices meant the average flipper sold their home for only 15% more than they initially paid for it in the 12 months prior. This is the lowest gross return on investment since 2008 (when it was 14%) and almost half 2022’s average return of 27%.
Levels of flipping have declined in every region of England and Wales, although the strong North/South divide has persisted, with some southern regions seeing proportionately half as many flips as those further north.
In the more expensive South of England, the significantly increased cost of financing likely contributed to the drop-off in flipping last year. With the average home taking around 100 days to sell, mounting borrowing costs have eaten into profit margins. Indeed, those who flipped properties in the South West in the first three quarters of 2023 sold for only 8% more than they paid.
By contrast, the North of England has cheaper house prices so the barrier to entry is lower alongside the associated stamp duty bill. Price falls in northern regions have also been smaller or non-existent, which has reduced the risks associated with flipping, although levels still declined nonetheless in 2023.
The North East remains a hotspot, seeing the highest proportion of flips and the highest percentage difference between purchase and sale price of 23% in the first three quarters of 2023. Of the 20 local authorities with the highest proportion of flips, all were in northern regions or in the Midlands. Hartlepool, in the North East, topped the table, with 4.7% of homes flipped, netting sellers an average 49% gross profit margin.
The profitability of flipping tends to rise from the point where house prices begin to pick up. As house price falls come to a halt and deflation continues to bring the cost of some building materials down, we expect to see more homes flipped in 2024 than we did last year.
