The Block 2019: Will the winning home sell for $3.5m?
When promos for The Block promise this will be the biggest year yet, it’s not just the size and scale of the properties that we expect will increase.
While over the years the show has reflected growth in Australia’s hottest property markets (in Melbourne and Sydney), buyers of these properties are paying well above the median price for a property from The Block.
Prices for these renovated homes have risen from $751,000 for the winning Bondi apartment in the first season back in 2003 to $3.02 million for last year’s winning apartment in St Kilda.
So, just how much over the median are these homes selling for? And are these properties actually a good investment?
Who buys a home on the The Block?
Since the show began, buyers have been paying between $222,000 and $2.49 million above the median price for the same property type in the same suburb for the homes renovated by the contestants.
Most of the buyers that the show’s advocate Frank Valentic has represented since 2011 have been investors who are attracted to the properties for both the rental returns and the tax offsets they can claim.
“Probably 25% are owner occupiers, but the majority are looking at it for investment because the returns are really good and the depreciation last year alone per annum was about $130,000 to $140,000 a year, which is unheard of for a property generally,” he says.
“Plus the rental returns are quite good, they are generally returning in the last series $2000 to $2500 a week in rent on top of that as well… that is high. But they also come fully furnished and generally there’s $100,000 to $150,000 worth of free furnishings that go with it and that’s why they get such high returns. And you can depreciate the furniture, which makes it very attractive for investors.”
The Block’s winning formula
So what makes these particular properties so attractive to buyers? realestate.com.au chief economist Nerida Conisbee says the show’s producers have picked premium suburbs that are attractive to a wide pool of buyers.
“The suburbs chosen are always high demand on realestate.com.au – they are expensive but have a lot about them that people like,” she says
“In many of the years, the homes have been sold in boom markets – price growth got quite extreme in some of these suburbs over this time.”
Valentic agrees that by selecting run-down homes to renovate in blue chip suburbs in the inner-city, The Block is offering buyers great homes in fantastic locations.
“So that’s a reason why it’s so attractive, it’s the locations they’re buying. People are seeing good value for money in that they’re not going to spend $2-$3 million to buy a dud of a property just because it’s got some association with a TV show,” he says.
Homes get bigger and bigger
Part of what has driven the price growth with The Block properties is the size.
The Cameron Street houses in Richmond that featured in series four of the show in 2011 for example, were about 120sqm each, where as the 2019 properties are much bigger.
“They have got bigger almost every series and they’re now monsters – these triple level ones. They’re over 300sqm plus they’ve got a lot of land with it, which is obviously going to add some dollars to what people will pay for them,” he says.
The Block 2019: What will the winning home sell for?
Valentic admits that with such enormous price growth over the years, the pool of potential buyers for The Block has shrunk and “it gets tougher” to find buyers.
“This year, given that The Gatwick sold for $2.6-$3 million, these are bigger and they’re terraces and they have land and double garages and some have views. We’re already thinking this year they’ll be in the vicinity of early to mid $3 millions. This is where I think they’re going to have to sit.”
Conisbee agrees and adds that the market is picking up in St Kilda, home to this year’s project in Grey Street.
“There are a few things in their favour – the market is recovering and St Kilda is a popular location. The property was purchased for $10.8 million – with five apartments being renovated, selling at between $3.5 to $4 million would be a great outcome,” she says,
But there’s only been one sale in the area in the past 12 months of a three-bedroom apartment, terrace or house in St Kilda that was over $3 million and that was the winning apartment in The Gatwick from last season.
“The median house price in St Kilda is now $1.6 million, so it’s going to be literally double what 80% of buyers pay in St Kilda. So it’s going to be right up at that very pointy end of the market where not many people will fly. We’re going to have to work really hard to find buyers,” Valentic says.