Property speculators were some of the bogeymen of New Zealand's most recent housing boom. But what does professional "flipping" look like? Kirsty Johnston and Keith Ng used sales data to track down the country's most prolific property traders, finding they were flipping upwards of 10 houses each every year, making an average $70,000 a sale - sometimes without doing any upgrades to the property.
Vicki Bickerton can recall the day her Papakura home went to auction. It was her son's birthday in June 2015, smack in the middle of Auckland's most recent property boom.
She wanted $460,000 for the house, a three-bedroom bungalow where she'd lived with her children before they grew up and moved out.
Despite the escalating property market, there was only one offer on Bickerton's home. It didn't meet her reserve. But the agent was insistent she take it.
"He said I wasn't going to get my bottom line. And he knew I'd had a few bad experiences being broken into there, that I wanted to downsize. So I took it," Bickerton said.
"Then three weeks later a friend called me. They said my house was back on the market. When I looked, they wanted $90,000 more than what they'd paid me."
It was the beginning of a dark time for Bickerton. Despite having pre-approval on a mortgage, once it discovered the low sale price, her bank backed out, and a long battle ensued. Then she found the new listing was using her marketing photos — ones she'd paid for — but they refused to take them down.
At that point, the home hadn't even settled. Bickerton thought about putting up a fight. But her father was dying, and she didn't know where to turn for help. When, a few weeks later, the home sold to investors for $540,000, Bickerton was in disbelief.
"They wouldn't have done a thing to it because I'd just fully renovated it," she said. "I was really angry."
The company that flipped the home, a rental business called Inspire Holdings, made $85,000 on the deal in just over two months. During the boom's peak, Inspire completed more than 70 such trades, with an average $86,000 gain. They were one of dozens of traders doing the same, largely through small property investment businesses designed to cash in on the huge windfalls provided by runaway property prices.
Inspire Holdings declined to comment.
Data shows that in the six years to 2018 — the span of the latest boom — more than 14,000 properties were flipped across New Zealand, gaining speculators $1.2 billion. For a successful flip, houses are bought cheaply from motivated vendors, lightly renovated or simply held, and sold as soon as possible to extract as much profit as possible.
"Flipping" is defined as properties traded twice within six months.
Bickerton's case was a textbook example.
A Weekend Herald investigation into professional property speculation, which examined in-depth data for the 10 most prolific traders across the country, found the average profit on those traders' flips was $68,000, and the average sale time just 71 days.
Over six years, estimates show the 10 biggest operators made a total 763 such sales, pocketing an estimated $50 million between them. It is unknown how much was spent on renovation costs or agent fees.
Data revealed the flippers primarily targeted two main markets. Around half focused on apartments in central Auckland, frequently buying from and selling to investors, including large numbers of foreign buyers.
The second group operated in lower-value suburbs such as Clendon in South Auckland, the Wellington region's Upper Hutt, Nawton in Hamilton and Linwood in Christchurch. Vendors in those sales were more likely to be owner-occupiers, analysis showed.
South Auckland was the hottest area. At its peak in 2015, almost 9 per cent of all sales in Manukau were flips. Comparatively, on the North Shore, flips were only 2.6 per cent of transactions. Nationwide those numbers peaked at 4.6 per cent.
According to CoreLogic senior analyst Nick Goodall, South Auckland attracted flippers because of its "untapped potential" in the eyes of traders — particularly before the boom, neighbourhoods there had yet to increase in value in the same way more central suburbs had already gentrified.
Properties were cheaper, and likely to be older or more run-down, meaning a lick of paint or a new kitchen could go a long way.
"At investors' seminars we've seen the promotion of that kind of activity — picking up older homes in cheaper areas where they can add value," he said. "They're trying to broaden the market that is attracted to that house, to create competition and get a higher sale price. It's the easiest way."
However, Goodall said there was also a more cynical element in the way some speculators focused on South Auckland, in that those in low-income areas were considered either more naive about the value of their homes, or sometimes perceived as more desperate to make a sale.
Goodall said those kind of tactics were wrong.
"You would hope for a bit more honesty in those situations. That's preying on people's education in terms of how the property market works," Goodall said. "It doesn't feel right, it's immoral behaviour."
'It takes a lot of specialised knowledge'
Flipping is an entirely legal practice. In fact, property speculation is recognised as a legitimate business category with the Companies Office. Many of the flippers in this story have their companies listed as working in "residential property investment", or list themselves as "speculators" or "traders" online.
The main legal issue for speculators is tax — anyone trading professionally in property must pay income tax on profit. And under the new Brightline rule, even amateurs who buy and sell within five years are now subject to capital gains tax (with some exemptions).
Additionally, real estate agents have legal obligations to act in the best interests of sellers, and must not "work in cahoots" or take bribes from investors. The Real Estate Agents Authority takes an active role in monitoring flipping, with new technology that allows it to track when properties have been quickly on-sold for huge profits.
Although there are occasional legal breaches, the larger questions for most commentators are not around the legality, but the ethics of flipping — and what it signals about the state of the housing market in this country.
First, however, commentators said it was important to acknowledge that flipping required a large amount of risk. Speculators frequently took on a large debt, and there was no guarantee the properties would on-sell for as much as they hoped.
Investor Jackson Bodle, one of the most prolific traders in Auckland's apartment market, said he thought it was a skill.
"Not everyone can get up, go to an auction or negotiate a property deal, spend a bit on it and average $57,000 turnaround," he says. "It takes a lot of specialised knowledge, confidence, funding and the passion to do it, plus more."
Bodle made an estimated $4 million across 70 trades in six years.
Myma Copplestone, who flipped 63 properties with an average gain of $91,000, says although the numbers looked big on paper, after renovation costs and agent fees, sometimes she made as little as $8000 per sale.
"Renovation costs can blow out massively sometimes. And if the market is slow, like now, you have holding costs — you have to pay the mortgage all that time until you sell," she says.
There are arguments in favour of flipping. The common investor position is that flippers who renovate before on-selling are improving housing quality, particularly those who insulate and modernise.
Ashley Church, former CEO of the Property Institute of New Zealand and OneRoof property commentator says he thinks flippers who renovate are doing a public good.
"Not just a lick of paint but an upgrade to the kitchen and bathroom and making it a nicer home, that improves stock and therefore society is the better for that," he says. "The fact they make a profit, that's how capitalism works."
Copplestone says some of her properties were "complete dogs" when she bought them. "We take them off people's hands, and then when we on-sell them someone gets a beautifully renovated property. The way I see it is that we are doing something good for the community."
However, not all flippers completed renovations, and certainly very few made extensive changes such as adding rooms, large balconies or outbuildings — the type of work that would require a building consent.
Consent data showed that fewer than 9 per cent of re-sold properties in Auckland had a building consent lodged during the period examined. Even the properties with extremely large gains — such as deals that earned flippers more than $150,000 — did not have consents lodged.
Church said there was a group of flippers in the market who simply bought, sat on the property, and waited for the market to rise.
"They're not adding anything, just using it as an opportunity to make a dollar. As far as I'm concerned, that's a blight on society. I might be a bit old-fashioned but in my opinion it's morally despicable."
The Weekend Herald approached each of the 10 most prolific flippers to ask about their businesses — what strategies they used, how much they spent on renovations, if they were still operating in 2019 as the market cooled.
None except Bodle and Copplestone would be quoted about their trade. Some said they didn't want the publicity, or to be harassed by "keyboard warriors". Others simply didn't reply.
Kris Rajan, who sold 56 properties across South Auckland with an average gain of $67,000, says he is happy to be on the top 10 list but he didn't want to talk shop.
"I feel good to know that though. That's what I do," he said. "I suppose the next person to knock on the door will be the IRD, but I'm good, it's all legal."
Later, Rajan's lawyer called to remind the Weekend Herald about defamation risk.
'It was overwhelming ... I didn't have a choice'
The Weekend Herald also contacted vendors involved in sales with the flippers operating in South Auckland.
Some of the vendors were pragmatic, saying although it was difficult to watch their homes re-sold so quickly for more, they too had made a profit from the rampant market and were able to go on to buy a larger home or move towns with retirement savings.
Others were less sanguine. They described feeling pressured or confused, or feeling like they had limited options. Frequently, there was only one offer on the house.
Some described slightly odd situations — for example a real estate agent who didn't bother to market the property, but instead found a buyer from the database. That house was on-sold 35 days later for an extra $57,000.
"They didn't do it up," the former owner said. "They bought it as a do-up but they didn't do it up. They were just using it to make money."
In several instances, vendors said the new owners began bringing buyers through the homes before settlement had even happened — while they were still in the house.
"We wanted them to wait until we'd moved, but they negotiated a long settlement and got us to sign something saying they could come on Saturdays," one vendor said. She did not want to be named. "It was three months of hell."
The flipper in that case was Kris Rajan. When the Weekend Herald asked him about bringing new buyers through properties before settlement, he did not reply.
None of the behaviour described by the vendors was illegal. Most trades, as in Vicki Bickerton's case, were simply good fortune for the flipper, and bad luck for the vendor.
In 2014, Priya Shankar sold her Māngere house to a company called Project Dragons for $365,000. At the time, her husband was in hospital awaiting an organ transplant and they were down to one income.
Shankar works in food service, and has two boys. At the time of the sale the youngest was just a baby. She was a mum, home alone, struggling and desperate.
"It was overwhelming. You know, rates, bills, mortgage, daycare. Where do you go, what do you do?" she said. "I didn't have a choice, I just thought renting was easier and I could focus on my husband getting better."
Shankar said the buyer knew she was desperate. But she didn't think she could get a higher rate. The house was on-sold four months later for $155,000 more.
"He must have made quite a lot of money. I think I knew that he would. It was clear he was a developer… But it's just sad. My kids were born there. They still think of it as home."
Five years later, the family are still renting, unable to get back into the market. They saw the house up for sale again recently, and thought of buying it back. But it was too expensive.
Shankar says she wishes she'd got more advice. But she didn't know what to do at the time.
"I know it's not illegal. They have the right to do this if they have money and the means. So what can you do? Who do you tell? There's no one."
Project Dragons replied to the Weekend Herald's emails with "no comment".
A symptom not a cause
In terms of market share, flipping is a small part of investor activity. In the six years spanning the boom, 647,000 residential properties were sold in New Zealand.
Of those, about a quarter were sold and re-sold in five years. And just 9 per cent of those of those were six-month flips. The 760 sales examined by the Weekend Herald — those sold by the most prolific investors — are a tiny part.
In places like Manukau, experts argue the impact of flipping is significant. Flipping creates churn, as tenants are evicted. The houses can sit empty for long periods, soaking up precious rental spaces.
Flipping's peak, in 2015, was also when there was a rise in homelessness; a year before the Government began to use motels to house families living in cars or tents — the highest numbers coming from South Auckland.
• Darker red indicates more flipping activity
Flipping also eats into the market usually occupied by first-home buyers. It is, in some ways, a problem in itself in terms of displacement, and driving up prices.
But most commentators believe flipping is more a symptom of the wider crisis with the housing market, rather than its cause.
Sociologist Kay Saville-Smith, housing researcher and director of CRESA, says flipping and homelessness are two parts of the same problem: a runaway property market.
"While some are able to extract inflationary value, others are excluded," she says. "And others get panicked, and take on significant debt, and struggle to save for retirement."
She says although she had sympathy for those who sold to flippers and felt ripped off, her bigger concern was for taxpayers — who are paying $3 billion in housing supplements and grants a year because of high rents and undersupply.
"Flipping creates part of that problem — a lack of affordable housing, because it's viewing housing primarily as a wealth-creating mechanism, rather than accommodation."
David Norman, chief economist at Auckland Council, says the only thing that will curb flipping is the same shift that would end all speculative behaviour — to make housing a less attractive choice to investors.
He said some policies were having an impact, such as loan-to-value ratios, the foreign buyer ban, a tougher lending environment, but it wasn't enough to stop speculative activity.
"The missing policy is capital gains tax. This Government and the previous one kicked it to touch. That's wrong. It is necessary on investment property. Why shouldn't all gains from business activity be taxed in the same way? Why is one asset category artificially inflated?"
And though flipping has declined as the housing market flattened from its Auckland peak in October 2016, as soon prices rise it is logical that all investment activity will pick up again, Norman says.
"I think the new policies will dampen behaviour compared to what's happened in the past, but undoubtedly in boom markets, people will take advantage of the gain because we don't have as strong restraints as we should have."
Nick Goodall, from Corelogic, says until such policies make flipping unattractive, the best thing sellers can do is seek a second opinion.
"Try to talk to at least one other agent to get a picture of what's going on. Even if you think you're getting a good deal, seeking advice is the best way to guard against it."
Who are they?
How we did it
The Weekend Herald created a complete list of "flips" from property data held by Land Information NZ. LINZ does not hold historical ownership changes for properties, but we were able to use weekly backup of the data (provided by LINZ) to reconstruct a timeline for these properties, showing how their ownership changed over time.
The data goes from December 2012, when digital versions of the records began, to the present day.
We searched this timeline for every property in New Zealand that changed hands twice or more within 180 days. For our definition of flipping, we excluded all the partial ownership changes, where some of the same owners remained. For example, joint ownership situations where owners were added or removed were not counted as having changed hands.
After excluding some special cases, such as Housing New Zealand or construction or trustee companies, we ranked the owners based on the number of flips they participated in as the flipper. These are the companies that have done the most flipping since January 2013.
We then used QV data to analyse the difference between the purchase price and subsequent sale price to calculate the flippers' "gain". This does not include any fees paid to agents or lawyers, or renovation cost. Some sales didn't have price data available. Averages rely on known prices.
Other data provided by Valocity and Corelogic.
