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Property flipping hits lowest level in a decade after tax raid

Property flipping hits lowest level in a decade after tax raid

Times5 hours ago
The number of homes flipped by property investors is at its lowest level in 12 years as it becomes harder to make any kind of profit.
Homes bought and sold within a year accounted for 2.3 per cent of all sales in the first three months of the year, the lowest proportion since 2013, according to the estate agency Hamptons. It found that that 7,301 properties were flipped between January and March in England and Wales, well below the ten-year average of 10,000 homes per quarter.
The average gross profit made on these properties was £22,000, an increase of £6,000 on the same period last year but down from £38,000 in 2022.
It comes after Rachel Reeves, the chancellor, raised the stamp duty surcharge on additional properties from to 3 per cent to 5 per cent in her budget in October. The property value threshold at which you start paying stamp duty was also lowered in April, meaning bigger bills for all homebuyers, when temporary reliefs introduced by Liz Truss in 2022 ended.
Aneisha Beveridge from Hamptons, said: 'The 5 per cent surcharge for investors, coupled with the value at which buyers start paying stamp duty being reduced, means it's harder than ever to make the sums stack up.'
'The extra 5 per cent stamp duty surcharge for those buying additional properties comes on top of the rates that apply for main homes — these are 2 per cent on the value of a property between £125,001 and £250,000 and 5 per cent for the amount between £250,001 and £925,000. From £925,001 to £1.5 million the charge is 10 per cent, and above that it is 12 per cent. The 5 per cent surcharge does not apply on properties worth less than £40,000.
The stamp duty surcharge on additional properties was introduced in April 2016 under the Conservative government. Before this, an investment property could be bought at the same stamp duty rate as one bought by an owner occupier, with an average of £1,900 paid per property in the first three months of 2015. The average was £6,375 in the first three months of this year.
Hamptons calculated that on properties flipped in the first three months of the year, stamp duty had lost owners 21 per cent of the average gross profit.
In April the property value threshold at which buyers start paying stamp duty fell from £250,000 to £125,000 — for first-time buyers it fell from £425,000 to £300,000. This has heaped further costs on property investors, with the average stamp duty bill for someone buying an additional property now £11,920.
• UK house prices fall as stamp duty hits demand
Beveridge said: 'If you take into account the new thresholds, stamp duty bills for property investors account for nearly a third of gross profits. And in some cases, these bills are now higher than the cost of renovating the property.
'This, together with rising material and labour costs and, in some places, falling house prices, makes flipping homes an increasingly tricky business.'
According to Hamptons, 80 per cent of homes flipped between January and March were sold for more than they were bought for, but only 66 per cent made a profit once stamp duty was accounted for. This didn't include any spending on renovations.
• Should landlords get more tax breaks?
The northeast is the area with the highest proportion of homes being flipped, with about 4.7 per cent of all homes sold being those bought less than a year before.
This was nearly double the average for England and Wales of 2.3 per cent, and three times the 1.5 per cent of flipped homes in London.
The three local authorities with the highest proportion of flipped properties were all in the northeast. Redcar and Cleveland was highest with 7.6 per cent, then Co Durham with 6.6 per cent and Hartlepool with 6.5 per cent.
Only one of the top 20 local authorities for flipped homes was in the south of England — Torridge in the Devon.
Beveridge said: 'These rising upfront costs have pushed investors further north, where properties can still be bought without paying any stamp duty. It's also where more house price growth has been concentrated over the past few years.'
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