The UK property market has boomed during the pandemic thanks to the stamp duty holiday, pent-up demand and a race for space.
Buyers outnumbered homes for sale by 20-to-one and average asking prices soared each month between January and July to a record high of £338,447, according to property website Rightmove.
And the red-hot housing market has brought in a legion of ‘property flippers’ who buy a home in need of improvement, redecorate it quickly and resell it within 12 months.
Quids in: Natalie Duke hopes to make £200,000 profit on her Essex home
Exclusive analysis of official data for Money Mail by broker Hamptons International reveals that nearly 19,000 homes were ‘turned over’ during the pandemic – and three quarters were sold for more than they were bought for, earning investors an average profit of £48,190.
Many flippers were driven by the chance to save up to £15,000 after Chancellor Rishi Sunak scrapped stamp duties on the first £500,000 worth of property purchases until June 30. The tax-free threshold was reduced to £250,000 in July, but buyers in England and Northern Ireland can still save up to £2,500 before the holiday ends at the end of this month.
However, those who buy a second home or investment property have to pay an extra 3 pc on top of the normal stamp duty rates. John Howard, a real estate developer and investor with 40 years of experience, says, “Every real estate boom is slightly different.
“This boom is unique because it was created by the stamp duty holiday and the incredibly low interest rates itself. And families are confined to their homes, saving more, allowing them to shift plans five or ten years into the future to now.’
Bullish approach: Joe Robertson, pictured with partner Polly, made a £45,000 profit buying and selling a house during the pandemic
So investors who were bold enough to buy a bargain in early 2020, when most other buyers were too nervous to make an offer, are now selling to a hot housing market full of house hunters armed with cash. Natalie Duke may have accidentally become a real estate flipper during the pandemic.
The mother of two sold her home near Hampstead in north west London to leave the city. Natalie, who has worked on property interiors for the past 20 years, wanted more space, so she moved into a Grade II listed, five-bedroom Georgian farmhouse in Saffron Walden, Essex, which she bought for £1.07 million.
I EARN £45K DOING NOTHING
Joe Robertson made a profit of £45,000 buying and selling a house during the pandemic – and he didn’t even have to do any renovations. The property inspector caught the flipping bug after completely remodeling his own home and making £125,000 in profit.
So he decided to buy two more properties when the housing market reopened in May 2020. “I was very optimistic,” said the 31-year-old from Manchester. ‘I like to go the other way to the market. But it’s not because I’m reckless, it’s a matter of investigation.’ Joe, who lives with his partner Polly Egan, 31, bought a three-bedroom semi-detached house in the suburb of Northenden for £205,000 and needed a complete refurbishment; and another in Chorlton with 1960s decor for £320,000.
He says, “I had an exit plan if real estate prices crashed, as some people feared. Being a landlord in the past, I intended to rent them out. “I had also heard whispers about a stamp duty holiday, which I thought would stabilize the market. So I was confident, but also scared.’ But when Joe raised the price of the home work in Northenden, he saw his hoped-for profit margin begin to shrink. He says, “Builders’ quotes went up because everyone wanted home improvements.” So Joe asked a local real estate agent for advice. He says: ‘They told me to do nothing and put it back on the market for £250,000. I accepted an offer for the asking price within two weeks.’
She’s spent the last seven months renovating it, spending about £100,000 and turning it into “an entirely different house.”
She has now decided to put it on the market and hopes to make at least £200,000 in profit. Natalie, 59, bought the bigger house because she thought her children, who were both on leave during the pandemic, could live with her if needed.
She says, “But now everything is settled and they are back on their feet. So while I didn’t intend to turn the property around, I can now.”
Saif and Gina Derzi, both 29, bought a three-bedroom detached house in Lincoln in early 2020, just before lockdown measures were put in place. It cost £172,000 with an 80 percent bridging loan from Together Finance, and they spent around £90,000 to solve it. They sold the property to a buyer in cash in September for £275,000, but Saif says if they had waited they might have gotten £25,000 more. Saif, who lives in Lincoln, says the cost of building materials has risen significantly in recent months, as has the price of real estate.
He adds: ‘Suddenly everyone wants to be a developer. During the lockdown, many people found that they had more money because they were spending less, and it created a market for people who wanted to take on a project. Dilapidated properties are like gold dust.’
Higher taxes on buy-tolet landlords also mean real estate investors are turning to flipping. Jo Breeden, general manager of mortgage broker Crystal Specialist Finance: ‘Since stricter tax rules were introduced and landlords’ profits fell, flipping has become more popular. “The number of flipping transactions we have arranged has increased by 40 percent over the past four years.”
But experts warn that when the leave and stamp duty holiday ends, the market will reset. The first signs of a slowdown are already visible: according to Halifax, annual growth fell from 8.7 pc between June and July. up to 7 pc. But while sellers may be less enthusiastic about a slowdown in the market, it could open up more opportunities for real estate flippers to negotiate home prices with homeowners.