Reality bites – property lessons to learn from The Block
There’s been furore from the public following the outcome of channel Nine’s latest season of reality television program, The Block. This season – dubbed The Glasshouse – met a surprising conclusion when several of the five newly renovated apartments, situated in the well-known inner Melbourne suburb of Prahran, failed to generate the buyer interest and prices seen in previous seasons.
It’s common for properties of this quality and size in similar locations to transact at prices starting from $1.8 million – unfurnished – and upwards. But with sales results ranging between $1.39 million and $1.9 million, what went wrong? Is this just the reality of reality TV?
There are many factors that influence the success of a residential property sale. Here, we look at the most common influences and how they apply to the latest season of The Block.
Supply and demand
A balance between supply and demand is crucial to any commodity – an oversupply typically diminishes value, while scarcity drives the reverse effect. There’s the suggestion that many Australian capital cities, including Melbourne, are oversupplied with apartments, which many attribute as a factor for the poor prices achieved on this season of The Block. However, the series’ Glasshouse apartments have virtually no comparable properties in, or around, the area, making them fairly unique.
In fact, the Glasshouse properties tick many of the boxes expected of million-dollar plus properties, including three spacious bedrooms, three bathrooms, two car spaces and lock-up storage – not to mention alfresco entertaining areas, walk-in pantries with butler’s kitchens, and internal laundry services. The finish of each property is of high quality and, befitting of million-dollar plus apartments, they make good use of design and layout, as well as integrating quality natural materials.
Location, location, location
Unbeknownst to many, this old adage is a three-part proposition. In real estate terms, the triple reference to location refers to the suburb, followed by the street within the suburb, and concludes with the position in the street (or position in the block, if it’s an apartment).
Set in the heart of Prahran, the apartment block is only a two-minute walk from Melbourne’s most famous shopping strip on Chapel Street and the many restaurants, bars, cafes and shopping facilities it offers. The properties are well-serviced by public transport, with a tram line on the doorstep of The Block and a below ground train line, just one block away. While set on Melbourne’s busy High Street, the construction of the office conversion means little noise carries into the apartment development.
The Block apartments tick the box in terms of suburb, are penalised to a degree for street selection, but some of the apartments regain points for their position in the block, namely those north-facing and off busy High Street. Aside from being located on a busy road, these properties have a lot going for them.
Setting the reserve
Determining a property’s worth can be tricky. That’s because cost doesn’t always equal value. Setting a fair reserve, that is, the minimum price you’d sell the property for, is crucial. Set the reserve too low and you won’t realise the full sale potential. Set the reserve too high, and you may diminish buyer interest and result in an extended sale period, or no sale at all.
The key to setting the right reserve is to measure a property’s worth against recent comparable sales in the local marketplace, making adjustments for differences between the properties.
The sale prices achieved on the Glasshouse apartments indicated the reserves were between $1.3 and $1.5 million dollars for each property – a bargain when considering the dollar per square metre value of these large apartments. While there’s limited comparable sales to gauge market value, it’s clear the Glasshouse properties were priced to sell.
So, if the properties are fairly unique, in a popular location and well-priced, what was responsible for the disparity in sales results?
There’s no arguing The Block – Glasshouse had a significant national viewing audience giving wide exposure to the five renovated apartments. The unusual nature of exposure given to the properties, compared with a typical marketing program, has previously positively influenced the sale price on auction day. But, the previous season’s properties set a precedent that may have impeded interest in the Glasshouse from prospective buyers, effectively reducing competition for the apartments.
While the Glasshouse properties are of high quality and the sales campaign was run effectively, the biggest impediment on the sales outcomes was the lack of bidders, together with an impetus to sell via auction on the day, rather than pass the properties in for private negotiation – which is what would typically occur beyond the realms of reality TV.
There are many lessons to be learnt from the latest season of The Block, including the things to consider when renovating and selling a property, the importance of supply and demand, the location of the property, and setting an appropriate reserve price. But more importantly, investors and home buyers should remember that The Block is a pseudo representation of the reality of the residential property market, so it’s important to undertake independent property-specific research and analysis to make the best property-related decisions.
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