Channel Nine’s hit series The Block could be caught in the firing line of Victoria’s flat housing market and investor woes, with one expert predicting the show will make a loss this year.
The properties in the seaside township of Cowes, on Phillip Island, are set to go under the hammer on Saturday.
For the first time in eight years, each property on the reality show has a price guide of less than $2m, with the five renovated holiday homes listed between $1.7m to $1.85m.
While the state has seen a recent uptick in first-home buyers, becoming the leading jurisdiction in the past 12 months to make the housing dream a reality for those trying to get on to the property ladder, investors have fled the market with complaints of higher stamp duty and an increase to land tax.
Most of the buyers on The Block are property investors, with businessman Danny Wallis – who has an estimated net worth of $120m – spending at least $30m on 11 properties across the show’s history.
Billionaire Adrian Portelli, who made headlines last year after lifting a $3m GTR racer into his $39m penthouse in Melbourne by crane, is also a regular bidder – having spent $16.65m on four homes over two years.
Regular Block bidder and buyers’ advocate Frank Valentic, the director of Advantage Property, said this year’s contestants would face a more “challenging” environment in “a buyer’s market”.
“For the contestants and for The Block TV show, and for buyers overall, there are more challenges now for our investor clients,” he said.
“The increased land tax, the new Covid tax, the new Airbnb taxes, and the last one … was we got confirmation the owners’ corporation, body corporate fees are $15,000 a year.”
The homes have a communal pool, tennis court and entertainment area equipped with a barbecue.
“That was a curveball that unfortunately saw a few of our buyers drop off.”
With a brief period of growth through 2023-24, Melbourne dwelling values peaked in March 2022 and were 5.1% below record highs at the end of last month (-5.7% for houses and -4.0% for units), according to data from CoreLogic.
First-home buyers are elevated across Victoria relative to other states, comprising just under a third of owner-occupier mortgage demand (33.1%).
Despite the flatter investment market, Valentic, who has been involved in 16 seasons of the show, said the lower price point had created more interest than any other seasons and he was expecting to see people previously priced out come to bid on Saturday.
The Block, though, would make a loss off the homes, he said.
“They’ll definitely lose money,” Valentic said. “If you’re looking at it just as a development … if you put it at roughly $25m, unless they’re selling each of the houses for about $5-6m each, which is not expected, they’re going to lose money.”
But The Block made around $50m a year in advertising, which was its main revenue. The show was “a juggernaut”, Valentic said.
Contestants on The Block compete to earn the highest price for renovating derelict properties.
Once the houses are sold at auction, the contestants profit any money above the reserve price. The team that has the greatest profit above the reserve price also gets a $100,000 bonus prize.
In 2023, Sydney couple Steph and Gian sold the Hampton East property they renovated for $5m. With the reserve set by the show at $3.35m, the couple profited $1.65m and the $100,000 prize money. This was the highest profit achieved in the show’s 20 seasons.
Some contestants, however, have failed to reach reserve and gone home empty-handed.
While some are lamenting the flat Melbourne market, housing economists say it is a good thing for new homebuyers.
Economist Saul Eslake said we “shouldn’t be shedding tears” for the Melbourne property market. Instead, it would be “a bloody good thing” if the rest of the country followed suit.
“Obviously, if the prices of housing were to go down by 30% there’d be a lot of people in negative equity in the financial system,” Eslake said.
“We’d be in trouble. You don’t want to wish for that, but an extended period where house prices moved sideways would actually be an incredibly good thing.”
Home ownership was at 72% in 1966 but had fallen ever since, to 65% in the 2021 census, Eslake said.
“For the last 40 years, government policy has been about inflating demand and constraining supply.
“So it’s sort of no wonder house prices started going up relative to incomes. And if you already own the house, then you would think, that’s fabulous, because it is making you wealthier.”
With 11 million homeowners and 2 million investors, there were now far more Australians invested in keeping house prices high, he said.
“Even the dumbest of our politicians can do that math.”
