The stamp duty holiday designed to stimulate the property market during the pandemic has also boosted the practice of flipping or buying a property to renovate and sell on quickly for a profit. Last year, a total of 26,340 homes sold in England and Wales had been bought within the previous 12 months, the highest number since the financial crisis began in 2007.
As a proportion of all last year’s sales, however, flipping accounted for 2.3% of the total. This is up from 1.9% in 2021 and back to 2019 levels, although still well below the proportion in 2007, when 3.7% of all homes sold that year had been flipped, equating to 52,950 properties.
It is likely the recent uplift was largely driven by the stamp duty holiday, which meant flippers could make significant tax savings when they purchased a property, although they still paid the 3% stamp duty surcharge. As a reminder, between 8th July 2020 and 30 June 2021, the temporary nil-rate band was £500,000; it dropped to £250,000 between 1st July 2021 and 30th September 2021; and returned to the standard £125,000 on 1st October 2021. Our research shows that 44% of homes flipped last year were bought between January and October 2021.
Many of the people who flipped last year also timed their purchase well because they were able to capitalise on the strong house price growth post-Covid. Indeed, house flippers in 2022 saw their highest cash returns to date, selling their properties for an average of £42,800 more than they bought them for on average. However, the proportional gain was 27%, a 1 percentage point decrease compared to the previous year.
On a regional basis, the North East of England continues to dominate the house-flipping market, with flipped properties accounting for the highest proportion of property sales last year, at 3.8%. Flippers in the region nevertheless made the lowest returns in cash terms of £26,230 due to lower property prices. London had the lowest proportion of flips, with just 1.6% of 2022 sales being bought and resold in the same year, but the region yielded the highest absolute return, of £93,730 on average.
Before 2016, flipping was most common in southern England because that’s where the bulk of the price growth was and the 3% stamp duty surcharge had not been introduced. However, more recently flipping has been concentrated further north, where most of the growth has been and often on homes which cost less than £40,000, meaning no stamp duty is charged on the purchase. Indeed, 20% of homes flipped in the North East in 2022 were bought for less than £40,000.
Of the 20 local authorities with the highest proportion of flips, Hyndburn, in Lancashire, was the most profitable location proportionally, with flippers achieving a 60% average increase between the sale price and original purchase amount. In cash terms, South Ribble, also in Lancashire, generated the highest return of £44,460 on average.
Going forward, with higher interest rates, increased materials and labour costs and a scarcity of tradespeople, flipping rates could fall. However, timing is everything. And we could see some opportunistic investors buy into the slower paced market in 2023 in the hope that price growth picks up again.