Weekly Economic Update - 23 September

This week Ray White Chief Economist, Nerida Conisbee looks at Australia’s top house flipping suburbs, as well as how COVID has driven up household wealth

Where is our house flipping capital?

In boom markets, house flipping (buying and selling a house within 12 months) becomes more popular. This is driven by the fact that leverage allows people to make a lot of money very quickly, even with high transaction costs such as stamp duty. Often the property is also renovated to add extra value.

So where are people cashing in from this rapidly rising market? By capital city, not too surprising that Sydney tops the list. The city is seeing very strong price growth with the median up over 35 per cent since the start of the pandemic. Anyone who bought in April last year and is selling now would have made a particularly strong capital gain, even with transaction costs.

The top 10 suburbs nationally are dominated by Adelaide suburbs. The list also shows locations that are relatively mid-priced. Topping the list is Kilkenny where 40% of properties have been flipped over the past 12 months. Anyone who did this is likely to have made more than a $100,000 capital gain over that time.

While house-flipping does work well in a rising market, the challenge comes if prices begin to fall. This is what makes it a risky strategy given we know how quickly property market conditions can change. For now, though, house prices are continuing to rise, there is a shortage of stock and given that prices have risen across Australia by over 16% since the start of the pandemic, this makes house flipping one way to take advantage of a strong price growth.

COVID has driven up household wealth

ABS data released today has shown that on average, we are wealthier than we were prior to the pandemic however your level of wealth is heavily impacted by whether you own property.

Household wealth rose 5.8 per cent to a record $13,433.7 billion, the largest quarterly growth since December 2009. This equates to wealth per person of just over $520,000.

Over the quarter, the level of household wealth increased by $735 billion. Of this, house price increases accounted for $576 billion. Coming in second was superannuation at $140.8 billion.