Sydney’s cooling housing market puts quick buck renos in jeopardy

Sydney’s cooling housing market is set to deliver a world of pain for the record numbers of property buyers who paid big money for homes with the hope of flipping them for a profit.

Alarming analysis from Ray White, Australia’s largest real estate network, showed speculative buying was rife in the Sydney housing market over the past three years.

Sydney was described as Australia’s “flipping capital” and had three times as many flips – transactions where the sellers held the property for less than a year – than other capitals, including Melbourne.

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And close to 5 per cent of all Sydney units traded last year were owned for less than 12 months before the sellers offloaded them.

Many of the property flippers who attempted projects last year were reported to have made considerable profits because of booming prices and record buyer demand.

Sydney house prices climbed nearly 30 per cent over the year, while unit prices increased about 10 per cent.

But more recent buyers attempting flips faced a different market – prices have dropped for three successive months and many homes going to auction are being withdrawn due to lack of buyer interest.

Ray White analyst William Clark said the cooling market, coupled with rising building costs, would mean many recent buyers attempting flips would struggle to simply break even.

Some flippers could compensate by simply holding their properties for longer, but others, especially developers, may have to sell their properties for a loss, Mr Clark said.

“Rising interest rates could create issues this year and some developers will want to get those properties off their books,” Mr Clark said.

Much of Sydney’s recent flipping activity was concentrated in the city’s southwest and inner suburbs.

The suburbs of Punchbowl and Darling Point accounted for the highest number of flips, followed by McMahons Point and Banksmeadow.

Mr Clark said there was a high chance some buyers attempting flips would have purchased for an inflated price, only to watch the market swing the other way after the deal.

“If you try to buy quickly you usually won’t get the best deal and it’s even harder when the market is moving quickly upwards … it’s also hard to sell quickly for a good deal.”

Mortgage Choice’s James Algar said even the flippers who made profits last year when the market was booming, did so by cutting corners with costs.

“Many of them are tradies who could renovate properties at a fraction of what is usually costs,” he said.

Amanda Baddock and husband Mark renovated a property just before selling it a few years ago said they wouldn’t want to go through the process again.

“We fixed it up and then put on the market and though ‘what a shame’. We built this huge deck, great entertainment area and never enjoyed it,” Ms Baddock said.

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The couple operate a building business in Sydney’s northern beaches region and said even they would be hesitant to do a flip considering rising building costs.

“You already have to pay such a big entry level price around here and then renovations are expensive. Timber is going up, it’s will only get harder,” Ms Baddock said.

The couple will soon be renovating their Davidson home but plan to live in the property many years after to make the most of the big changes.

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