24 Aug 2011
A lot of people were shocked at the results of the television finale of the Block, with only three of the four renovated Richmond cottages managing to sell at their much anticipated auction.
The Block’s property results have started a spate of discussions about the current property market, with many articles in the media painting a picture of doom and gloom.
While it’s true that the property market has been slowing down in many parts of Australia, it’s important to remember that the Block is still a television show and the property sales that were conducted were done in very unique circumstances.
With this in mind, the show did still highlight some real, real estate lessons that we can all take home after watching the series.
*Beware of overcapitalising
– Channel 9’s Watercress Productions allegedly paid $3.6 million to secure the four Block properties, according to the Australian
, plus about $180,000 was paid in stamp duty on the purchase of the homes, and up to $400,000 was spent on renovations. The properties sold individually for $855,000, $860,000, $922,000 and $1,000,000.
If these figures are accurate then it doesn’t look like Channel 9 have come even close to making back the amount that they spent on the houses (though they have no doubt profited from the show in other ways). The lesson learnt here is add up your figures and do your research before investing in a property, and don’t spend money on expensive home improvements if you are unlikely to make your money back on them when it comes time to sell.
*Consider your timing – The Block houses probably could have sold for more if they waited for the market to pick up before selling. Unfortunately the Block contestants had very strict deadlines to stick to, but in real life you may be able to hold out until the market is more in your favour.
For those who plan on making a profit by flipping property in a short period of time, perhaps you should ask yourself whether or not you would be better off incorporating your property investment into a longer term plan, especially when the property market is moving at a slow pace.
*Set the right price –The Block houses may have simply been priced too high for the Richmond market. The reserve prices for the homes were set months before the homes were put up for auction and property prices had fallen in that time.
Many buyers in Richmond probably decided to look for other homes in the area, of similar quality or appeal, but without the hefty price tag.
*Auction is only a process – Not all of the Block properties sold at auction, but as was seen afterwards, that doesn’t mean that they can’t still sell for good prices. Two of the houses that didn’t sell at auction, still went on to make $72,000 and $50,000 above their reserve prices.
After an auction takes place, don’t think that it’s all over, negotiations can still be made with buyers and you can still reach a sale price that you’re happy with. It is strange that some buyers believe that they are suddenly in competition with nobody with a private treaty sale. With an intense auction marketing program and national TV coverage of the Block, it is no surprise to me that the properties sold after auction and for good prices.
*On-site auctions- I declared and could see during the event that the people there looked to be there for the wrong reasons, to get their face on T.V!
It was a closed invitation-only event, meaning that you would have had to register before the event and had to be known to the agents. An on-site auction would have definitely attracted a bigger crowd, more excitement and possibly drawn an outside buyer. It was good to hear that one of the Auctioneers came out and publicly said on radio, “it should have been on-site”.
My last comments would be that it just seems ironic to me that the Department of Fair Trading used the national coverage of such an event to highlight and try and bring down our industry which is over-litigated and over-regulated. To try and say the agents were under quoting was a joke. I believe all the agents and Auctioneers, under the circumstances, did the best job that they could. It wasn’t a normal auction event.