Auckland speculators flipping homes on same day of purchase
Saturday Sep 10, 2016 – NZ Herald
Data reveal instant resales as sharp investors ‘flip’ properties for quick riches.
Auckland property speculators are on-selling homes on the same day of purchase for huge profits, sometimes without even setting foot inside.
Incredibly, one Auckland house was sold three times in a single day with its value surging by nearly $80,000 in less than 24 hours.
Other astute buyers have “flipped” their new purchases for instant profits worth tens of thousands of dollars, with one speculator pocketing $100,000 the same day they bought and sold a Papatoetoe house.
New data released exclusively to the Weekend Herald by free property valuation website homes.co.nz identifies about 30 properties that were re-sold on the same day of purchase in the last 17 months – often by ruthless investors chasing quick bucks.
However the Weekend Herald has identified other same-day transactions and the actual number is likely to be higher.
With the average Auckland house price now tipping $1 million, frenzied property speculation is helping drive up prices and locking thousands of Auckland families out of home ownership.
But one investor who buys and sells Auckland properties – sometimes on the same day – has defended the practice, labelling it “easy money” in a rising market.
“If you can swing a property deal once a week and make 20 or 30 grand, why would you not do that?” said seasoned Tauranga-based investor Ian Stevenson.
“Big money is chasing good profit here but it’s the market’s rise that’s driving it because they’re not fixing the Auckland problem.”
Stevenson, who said he declared all his profits and paid tax, knew of speculators who had realty agents scouring Auckland for suitable homes to buy and sell for immediate financial returns.
Back-to-back buy and sell agreements let investors “take the cash”, often without any improvement work being done.
“We’re just opportunistic. It’s about making money.
“Being merciless here, and many are doing it, the market is about speculation.”
Stevenson’s candid comments will rile beleaguered house-hunters trying to scrape together deposits while prices continue to soar.
The quick-fire sales also raise questions about whether speculators are routinely declaring profits to IRD, and if real estate agents are securing the best possible price for their homeowner clients.
The revelations follow a Weekend Herald investigation in July which found speculators were making an average daily profit of $1600 trading properties on Auckland’s runaway housing market, with the average on-sale netting investors a cool $114,000 return.
Homes.co.nz marketing manager Jeremy O’Hanlon said the figures were a stark reminder that people who under-valued their homes risked losing thousands of dollars when selling.
“It makes you feel for those who were clearly misinformed, or failed to effectively research their home’s value.
“I’d hate to see my home on-sold for more within days of settling. It’s a real sucker punch.”
Construction and property lawyer Adina Thorn said same-day on-sells were relatively common in the apartment market where purchasers were more likely to buy properties “sight-unseen”.
They were usually speculators chasing instant profits in a rising market, but could also highlight a power imbalance where the homeowner, relying on expert advice, had under-sold their property.
“You’re relying on your agent to tell you what your property is worth.”
Labour’s housing spokesman Phil Twyford said: “This is more evidence of a wild west property market where people are making obscene profits flipping houses.
“It’s sickening for first home buyers who are shut out of the market by the kind of price increases that this speculative frenzy is causing.”
IRD investigations and advice manager Lynley Sutherland said the department had a national focus on property dealing and speculation, actively identifying regions of high activity and risk.
“It is almost certain that taxpayers associated with a property that has been bought and sold several times in a short space of time will come to Inland Revenue’s attention, as long as legitimate land title transfers have taken place.”
• The data is based on public sales records provided by Auckland Council to homes.co.nz for residential market transactions between January 2015 and July 2016. It excludes the sale of multiple properties in a single transaction, non-arm’s-length sales where a prior relationship exists between buyer and seller, and transactions with incomplete sales records.
Read more by Lane Nichols