Does The Block stack up as an investment?
After six buyers forked out more than $1.7 million each for a slice of The Block action, readers might be left wondering whether they’ve invested wisely.
All six of the apartments renovated as part of season 10 of Nine Network’s The Block sold above reserve this week, with the highest sale going for $2.3 million and the lowest for $1.735 million.
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According to RESULTS Mentoring director Brendan Kelly, investors who purchased at the auctions are likely to have paid above market rate.
“They’re going to be inflated because people are going to be willing to buy the brand. It’s like buying a Ferrari,” he said, adding, “You are getting emotive competition so that they can wear a badge saying ‘I bought a place on The Block’.”
The decisions taken during the apartment renovations also mean that the properties are more suited to an owner-occupier rather than becoming an investment property.
“It’s wonderful for the Nine Network, wonderful for the advertising, wonderful for the ratings; but as an investment, no. Frankly, I would think they’re more aligned to the owner-occupier. The amount of money they spend and the level of finesse they go to [...], it’s more catered to the owner-occupier than the investor.”
The crux of The Block’s issue as an investment proposition is that investors should be able to see through emotive appeal and focus purely on an investment’s financial credentials, according to Mr Kelly.
“An investor is more focused on the money than the product, so what they buy is centred on the return on investment. If an investor buys from an emotive perspective then you’ve got to question the calibre of the investor.”
But buyer’s agent Frank Valentic, who regularly appears in the hit show, said that investors have consistently shown an interest in The Block throughout its history, for good reason.
“The depreciation on these Block apartments is massive; I’ve never seen a depreciation schedule as high as that for any investment properties that we’ve bought for clients over the last 15 years. It’s in the vicinity of around $75,000 a year, so in the first five or six years it’s around over $300,000.”
“High-end investor clients who are paying lots of tax are really attracted to that,” he added.
His agency, Advantage Property Consulting, was engaged to bid on four apartments during The Block auctions on behalf of investors but the extravagant prices proved too far beyond his clients’ range.
These clients were also attracted by the returns achieved by previous The Block apartments, which are in part driven by their celebrity appeal.
“The returns, most of The Block apartments, we’ve bought a few over the years, most of The Block apartments when fully furnished return in the vicinity of $1,750 to $2,000 a week. I think these will be around that level.”
And if investors have been sucked in by 'The Blocktagon' (as this season was officially referred to), then it’s hardly the first time, according to Mr Valentic.
“We’ve now bid at 23 of the 30 Block properties and I’d say about 20 of those have been for investors, there’s only been a few owner-occupiers amongst that lot over the last seven series.”
What do you think? Would you invest in an apartment from The Block?
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