The Block Auction

the block

The Block – the real winners and losers

Watching The Block last night, the end story was that “everyone was a winner”.

The renovators won, the buyers agents won and the TV station won with the ratings, despite paying out a television record $3,165,000 in prizes.

Huge prices were paid for all of the St Kilda townhouses, with the winners Darren and Deanne selling for $835,000 over the reserve price of $1,455,000, or 57% more than what the property was valued at prior to the auction.

Winning a property at auction is a great feeling for buyers, with emotions of triumph and relief. In the following days the reality of a mortgage usually sets in and sometimes with varying degrees of buyers remorse.

Paying a huge price for a property would be fine if property markets were on an endless trajectory upwards. With growth in Melbourne and Sydney over the past few years at continually stratospheric heights, it is hard to blame buyers for thinking that growth will be endless.

For those of us who have been in the property industry for a long time, we know that markets rise, fall and also at times remain steady. We have seen many winners make large capital profits, however we have also seen many losers who have paid too much for their properties at the high end of a boom cycle.

Paying a premium amount for a property is less of an issue if the buyer will have no mortgage, however most people purchasing property do have mortgages and in the current market many have been borrowing a large percentage of the property purchase price.

Which brings us back to the large prices paid for the units in The Block. Now that the cameras have moved out and the production crew and media circus have moved on to other entertainment, the buyers will be preparing for the reality of settlement and paying the remainder due.

Is there any ongoing cachet or prestige for previous Block television properties? The answer in most cases is no.

The truth is that these places were renovated by amateurs finishing properties quickly on limited budgets to meet episode deadlines. Many will have repair and maintenance issues to be addressed, and when resold in the years ahead being a Block property is unlikely to be the sales agents main selling point. At that stage buyers will be more interested in the fundamentals of the property including the quality of the fittings and materials, the location, aspect and natural light, floor plan, noise, and the other important features.

As a buyers agent it was particularly disappointing to see the Melbourne buyers agent’s conduct at The Block auctions. The approach appeared to be more concerned about “winning” for their clients regardless of the auction bidding increments made and eventual price paid. Professional buyers agents should be acting in the interests of their clients and often that involves advising them not to proceed with a property or to set a measured maximum price.

If bidding at auction on behalf of a client, it is best to not be continually on the phone to your client during the auction as it is harder to keep a poker face and to concentrate properly, and your competition will find it easier to see when you are nearly finished. We suggest clients have a pre-written maximum bidding amount, which means that our client’s amount is determined by a proper price analysis on the property rather than being influenced by the frenzied bids of other buyers.

HENRY WILKINSON is principal of buyer’s agency Homesearch Solutions.

Where did The Block Glasshouse go wrong?

By Todd Schulberg for Property Observer on 13 October 2014

To all of Australia, The Block Glasshouse auction results were a massive shock.

It was the first time in a very long time there was a harsh realisation that vendors don’t necessarily make hundreds of thousands of dollars above their reserve, and people do buy within their limits.

Take it back a few months, and people were high fiving and celebrating the success; last night we saw reality.

A lot of people expressed sympathy for the contestants that didn’t make a lot of money from their sale.

It served as a somber reminder of the gauntlet you run when you play the property market.

There are thousands of everyday Australians who have missed out on gains from their own projects, with an even harsher rationality hitting them with no cameras, media interviews, endorsements after the hammer has hit.

But why did The Block go wrong? Here are the main reasons:

THE APARTMENTS WERE OVER CAPITALISED

The contestants were trying to sell such a premium product, making investors very cautious. When people buy property, they want to see the potential upside and where they themselves can make money. The problem with having the apartments so impeccably finished, is it made it harder for buyers to add value. Because of that, they realised they were most likely buying them at the peak of their value.

The reserves were set with what the production needed to get back to make it viable, and it seems they may have put too much money in to making a high end product.

NOT EVEN THE BLOCK CAN TRIUMPH SIMPLE ECONOMICS

There are a lot of factors that go into a property’s price. But at a fundamental level, the rules of supply and demand hold firm.

Prahran has seen a huge amount of redevelopment in the past 24-36 months. Trilogy apartments, which is approximately 200 metres further up High Street, has 323 apartments on offer, with an apartment complex across the road also offering brand new apartments. With so much on offer, it’s hard to compete with buyers shopping for value.

THE APARTMENTS WERE NOT NECESSARILY BUILT FOR THE END CONSUMER

It’s easy on a design show to create a beautiful showpiece, but this doesn’t necessarily transfer to practicality, or ensure you get your money back.

People want value for money above anything, and some of the apartments were so lavish that they lacked genuine real living opportunities. It’s all good and well to live in a luxury masterpiece, but you have to ask if it provides a home for someone and if it is what they are after.

THERE WERE BETTER PROPERTIES ON THE MARKET FOR THAT MONEY

A simple reason to understand why consumers didn’t bid the properties up, is their belief they could get something better for those prices. If you have a look at other homes for sale, prospective buyers could have bought:

204/4 Cromwell Road, South Yarra

An open spacious apartment in South Yarra available for less money.

Or 3 Mary Street, Prahran for $1,030,000. Mary Street offers three bedrooms, two stories and an open verandah on its on title of land.

The free standing house pictured above is quoted at $1,030,000.

Either way, the lessons learned are that reality TV shows aren’t necessarily the way to success and people won’t just buy anything.

With strong demand, people do want to see value for money and something that can offer capital gains over the long term. Properties that are unique, have land, and potential upside for redevelopment will trump established apartments most of the time.

Todd Schulberg handles all things marketing for Homely.com.au.

 Top 10 Most Expensive Homes in the World

10.  Rybolovlev Estate – $95 Million

 

This house is the most expensive single family home in the country and, since it was owned by Donald Trump, it’s obviously the most expensive home ever fought over in a divorce case.  The 33,000 square foot oceanfront mansion has become a key part of the proceedings since Trump’s ex-wife Elena Rybolovlev demanded jurisdiction due to infidelity.

This home has 18 bedrooms, 22 bathrooms, and retails for $95 million, making it the most expensive single-family house in the nation…weird, we’re pretty sure we found nine more for this list.  Unless we’re suddenly on TopOnez.Net

Originally on sale for $125 million, it ended up being haggled down to a mere 95.  We guess the economy is hurting everyone these days.

9.  Silicon Valley Mansion — $100 Million

 

As the most expensive single-family home in the US, this house… wait, didn’t we just say that the Rybolovlev Estate was the most expensive single-family home ever?  Well, okay, this one went for 100 million so I guess it wins.

With 5 bedrooms and 9 bathrooms, and an indoor and outdoor pool (in case it rains, we guess), it’s all-in-all a pretty fancy house.

8.  Fleur De Lys — 125 Million

 

Despite being marketed as the world’s most expensive house, the Fleur De Lys somehow only falls on number 8 on our list.  Wow, that’s weird, huh?  It’s almost like people on the Internet are wrong.

Fleur De Lys has 41,000 square feet and 15 bedrooms, but apparently no bathrooms, which we think is a huge oversight either by the architect or the person writing the articles we’re using as sources.

7.  The Manor — $150 Million

 

Here we are, finally, the most expensive residential real estate listing in the US, according to Wiki-freakin’-pedia.  $150 million.  Feels pretty good to put that part to rest, doesn’t it?  Thanks, Aaron Spelling, for having the (7th) most expensive house in the world.

This house features 56,000 square feet, 123 rooms, a bowling alley, an ice rink and allegedly an entire wing devoted to Spelling’s wife’s wardrobe.

6.  The Pinnacle — $155 Million

 

Owned by Tim Blixseth, in Montana, this house is unique for two reasons: it has a private chair lift directly from the house to a nearby ski-resort (which Blixseth owns), and is the only house on this list so far named that doesn’t claim to be the most expensive in the world.

Also, we’re gonna call it right now: best back yard.  Because it’s a ski resort.

5.  Franchuk Villa — $161 Million

 

This five-story, freestanding 10-bedroom Victorian Villa also features an underground indoor swimming pool, panic room, and private movie theatre.  It’s also the world’s most expensive home (yeah, sure it is), at $161 million.

How fancy is this place?  Allegedly, during some remodeling, the noise made the Mayor of Moscow angry.  The house is located in London.  That’s right: the house is so fancy it doesn’t make sense.

4.  The Hearst Mansion — $165 Million

 

Top Three Facts about the Fourth Most Expensive House in the World: it was used in The Godfather, JFK spent his honeymoon there, and (holy crap, get this): it’s the most expensive home in the US!

It features three swimming pools, 29 bedrooms (you have to supply your own horse heads har har har), movie theatre and, for some reason, a disco.

3.  Fairfield Pond — $198 Million

 

Currently valued that way due to its property taxes, this 66,000 square-foot main house has a basketball court, bowling alley, and a $150,000 hot tub. The most valuable home in the US (again, according to Wikipedia).

2.  Villa Leopolda — $736 Million

 

Wow, that’s a big jump in price.  Built by King Leopold II of Belgium in 1902 and located on the French Riviera, this home was purchased by Russian billionaire Prokhorov, who is so rich he lost billions to the latest economic collapse and still had enough fun money to buy himself a three-quarter-billion-dollar summer home.  It has 27 stories, 19 bedrooms, and a rumored 50 full-time gardeners.

1.  Antilla – $1,000,000,000

 

This is it. The one you’ve been waiting for. The grand finale. The one billion dollar home. We give you…Antilla.

Located in Mumbai, Antilla challenges pretty much everything you’d expect about “what is possible in a home” and “what is possible for architecture.”  The 27-story house features six floors of parking, a health level with a jacuzzi, gym, and “ice room,” a ballroom level (for dancing?) several floors of bedrooms and bathrooms and even a four-story garden — because, yeah, we guess that’s possible.

The architecture is based on an Indian tradition called Vastu Shastra, which is supposed to be conducive to the movement of positive energy.  In keeping with this, each floor has not only a unique design, but an entirely unique set of materials and aesthetic design — meaning each room is meant to look like it’s from a different house.

Basically, this house has everything — things you can imagine, things you can’t imagine, and things you never thought to imagine but are now imagining because they sound like the greatest thing you’ve ever heard of.

Written By JF Sargent for toptenz.net