Investors back 'flipping' for profits
Buying a house and selling it on quickly for a profit was all the rage during the property boom. Now that the property market is recovering, at least in certain pockets of the country, the practice of flipping seems poised for a tentative comeback.
The profits may be a fraction of the money to be made during the heady days of the Celtic Tiger – but that profits can be made at all is hailed as a sign of stabilising and, dare we say it, rising prices.
The evidence is there in the property price register. For instance, a period villa-style home in Lombard Street West in trendy Dublin 8 was snapped up for €200,000 last year. The new owners renovated the property and put it back on the market with an asking price of €485,000. It sold for €440,000 in May. However, according to agent King and Associates, the property required major renovation which ate substantially into the €240,000 difference in the buying and selling price.
A Victorian home in the seaside suburb of Monkstown was sold for €1.22m in August 2010. The new owners now have it back on the market for €1.575m. The €350,000 difference in price tag takes into account some major renovations and a new conservatory, which reportedly cost close to €300,000.
A house in leafy Dundrum sold in March for €500,000. Last month, Vierwinden on Ballinteer Road was sold for in excess of the asking price of €575,000, minus a good chunk of the back garden, which was retained by the seller.
Although each house tells a different story, there is no disputing that in each case the properties increased in value between the time they were bought and when they were sold.
According to Martin O'Mahony, whose estate agency in Goatstown sold Vierwinden, investors who were lying dormant for years are now dipping their toes back in the water.
They are being lured back by the rising prices in certain pockets of south Dublin and a tax incentive passed in the 2011 Budget, but which runs out at the end of the year.
Ironically, the tax incentive discourages "flipping".
Anyone who buys an investment property before December 31 and holds onto it for seven years will not have to pay capital gains tax when they sell it. So investors will have to wait before realising a profit. Nevertheless, according to O'Mahony, the looming deadline is enough to encourage investors back into the market place.
Low stamp duty is also an attraction, especially for those who aren't typical investors but who hope to buy a house, fix it up and sell it on for a profit. Stamp duty currently runs at one per cent.