The 20th milestone season of The Block may have only just hit our TV screens but the newly released price guides for the five renovated Phillip Island holiday homes suggest the show's producers may not even recoup their purchasing costs.
In a landmark move, every property on the 2024 season of the hit reality show has a price guide of less than $2 million for the first time in eight years.
The Block's producers paid $8,758,000 for the site at 113-119 Justice Road, Cowes last September, but they are potentially facing massive losses in this year’s season after purchase and building costs are taken into account.
All five homes have a price guide of $1.7 million to $1.85 million, meaning each property would need to sell at the top of that range for the producers to recoup the costs of purchasing the site.
Regular Block bidder and buyer’s advocate Frank Valentic, director of Advantage Property, told realestate.com.au that Channel 9 would not make any profit on the completed homes, with stamp duty alone on the site purchase amounting to $438,000.
The Block producers paid about $8.76 million for the one hectare site at Cowes on Phillip Island. Picture: realestate.com.au/sold
“That brings it to over $9 million, and if divided by five for just the actual site with the land, that’s $1.839 million,” he said.
“They’re definitely not going to make any profit and Channel 9 don’t do it as a profit making venture.”
“Channel 9, I think get $50 million profit a year from the show and all their advertisers, and that’s where I think they obviously get their money.”
Regular Block bidder and buyer's advocate Frank Valentic said the show's producers will struggle to recoup their initial investment, based on the price guides for the completed homes.
Additionally, the building costs of each home were likely to amount to in excess of $1 million to $1.5 million, Mr Valentic added.
“Each property would owe them, I would imagine, at least $3 million. So if they don’t shuffle that, they are obviously going to sell at a loss.
“They're not really doing it to make profit, that’s not what the show is about – they’re not developers, they are in the TV industry.”
Billionaire businessman Adrian Portelli paid $5 million to purchase Steph and Gian's home at 20 Charming Street, Hampton East on last year's series, although has admitted he overpaid. Picture: realestate.com.au/sold
However, Mr Valentic said the lower price guides could pave the way for a bigger pool of buyers, with this year’s prices in a more affordable price range compared to last year where most of the properties ended up selling in excess of $3 million.
“I think for me hopefully as a buyers advocate - I have bid on now I think around 50 [Block homes] and we generally get investors that are looking at these properties,” he said.
“And it is harder to get more investors with $4 to $5 million ... so it should attract a pool of investors there that weren’t able to afford the last few series.”
Additionally the lower price guides, coupled with this season being the first to be set in a coastal location, could open up a market of buyers wanting to snap up one of the properties for use as a holiday home or Airbnb, he said.
A first-hand look at the Phillip Island homes
Mr Valentic, who has had an insiders look at the Philip Island homes, said while everything was not completed at the time, the homes were going to be a little bit “special and different” with the gated community featuring communal facilities, such as a tennis court and pool.
“They've never sort of had this thing, so I think that will be a bonus for them,” he said.
“I think the houses are obviously in a bit more of an affordable area – the median price is sort of more $750,000 to $800,000. So having it bit further out — it's a two hour drive out of Melbourne — could make it just a little bit more affordable for different buyers.”
The 2024 season of The Block takes place in a former holiday resort on Phillip Island.
In comparison, the Gisborne tree change homes in 2022 were a lot more expensive at $4 million plus – almost double the price range of this season’s homes, he said.
“One of the main problems with that was, it was an expensive price for that area,” he said.
“A lot of work needed to be done for the outside of those properties because they had all that acreage around them.
“It wasn’t sort of developed or landscaped, and you were literally given a bit of farmland that had a house thrown on it and then I had clients that just went, ‘Nah, that's going to be way too much work’.”
Newlyweds Kristian and Mimi won the first week on The Block this year with their guest bathroom. Picture: Channel 9
With that in mind, Mr Valentic said this year’s homes were likely to outperform the Gisborne season.
“I think there are people that will be attracted to somewhere like Phillip Island, because you have got the attraction of a really good coastal destination,” he said.
Soaring new land tax concern for auction day
The Victorian government’s increased taxes and tougher rules on property investors could impact this year’s all important auction day.
Owners of Victorian properties with an unimproved value — also known as site value or land value — totalling $3 million or more now must pay $31,650 in land tax, plus an additional 2.65 per cent of their landholdings' value above the $3 million mark.
Buyer's advocate Frank Valentic said many investors baulked at the idea of purchasing homes for the 2022 Gisborne season, given the maintenance associated with the large rural properties. Picture: realestate.com.au/sold
Mr Valentic had previously told realestate.com.au that many Block buyers were investors drawn by the substantial tax deductions that applied to properties from the show, when yearly depreciation is taken into account.
Looking ahead to the November auction day, the new laws potentially posed a challenge as nearly all properties he has bid on at The Block auction days have almost been exclusively for investor clients.
“If they’re not around, I am not going to be bidding,” he said.
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