Channel 9 The Block 2011: Purchase, Reserve & Sale Prices, Renovation Costs, Rental Yields; Block houses expected to lose half a million dollars each. All four cottages bought by investors.
Tweet Topic Started: 22 Aug 2011, 09:43 AM (26,555 Views)
Holly Byrnes From: The Daily Telegraph August 23, 2011 12:00AM
Buyers' broker Catherine Cashmore, who advised two clients against buying into the Richmond strip in Melbourne, predicted the disappointing results two months ago, arguing Watercress had paid over the odds for the derelict block.
Title deeds data confirmed George and Vicki Stoupas, the owners of the properties, had paid just $24,500 for two of the terraces in 1977, and doubled up their portfolio before all four terraces passed in at auction for $2.85 million on November 27 last year.
One day later the vendors had negotiated a settlement with Watercress, selling for an additional $800,000.
The re-stump, re-wire, re-plumb & re-roof probably cost $40,000 The contestants fit-outs $100,000 (+$?? Labour) The second storey extensions of about 27 sqm. about $60,000 That's about $200,000 plus landscaping (or was that included in their budget?)
Where did the rest of this $400K go? Sounds a little like real estate agent exaggeration. I didn't watch the series, only a bit of the auction & have looked up the houses for sale. Did they extend the buildings on ground as well?
These shows are very misleading when it comes to actual costs (materials + labour + consultants + government fees & taxes).
If the lot instead were bought last year for $2.85 million exc. stamp duty, the average price would have been $712K. Add the aforementioned construction & fit-out costs of $200K & that’s $912K.
So if you ignore a lot of work was done by amateurs and may be of questionable quality, that seems to indicate, at an average reserve of $879K these houses have gone backwards $33K in 9 months (4.8% fall pa).
Perhaps will also kill the reno market. 'You mean we cant double the house price with $100K worth of paint, kitchens and dainty throws?'. As for the houses in Richmond, well its still full of drug addicts and scumbags among the psuedo rich tossers who buy into 'The block' trend.
that could be a big problem because it seems that renos are keeping construction industry alive
The re-stump, re-wire, re-plumb & re-roof probably cost $40,000 The contestants fit-outs $100,000 (+$?? Labour) The second storey extensions of about 27 sqm. about $60,000 That's about $200,000 plus landscaping (or was that included in their budget?)
Thanks BA. I take your point. There's no clear data on how much the "pre renovation" work cost. I used the agents estimate, it may or may not be correct.
Eight lessons to learn from The Block's lacklustre auction
Tuesday, 23 August 2011 11:28
Catherine Cashmore
Surprised by The Block result at the weekend? Well, don’t be. This is the new face of Melbourne’s auction market, and it’s not expected to change in the short term. Auctions don’t just need bidders – they need “confident” bidders, and confidence – as we’re all aware – is not in abundance at present.
But then Channel 9 never intended this to be a program focusing on the state of our current real estate market. The houses weren’t picked to make a profit on initial investment. After all, the homes are opposite a car park, in the shadow of the commission flats, with no off-street parking, average floor plans, and aside from the standard of renovation, they didn’t present any real competition to other better-located period properties in and around the surrounding area. The original intention for 37-43 Cameron Street, Richmond was a block of flats, and although this would have produced better returns on the land, Channel 9 had an idea that would ensure a much better profit if they kept the original homes.
This was a huge success for Watercress productions. The advertising attracted thousands to the open homes and the ratings were tremendous. No doubt they would have made a healthy profit from their sponsors, and overall it was a big hit. However, for those interested in property investing it highlighted a few important lessons we can all take on board. Firstly, anyone thinking it’s easy to get rich quick from “flipping” will now I hope understand that this is not the case. Building wealth from property only safely works when incorporated into a long-term plan. Secondly, contrary to popular belief, most homes listed for auction sell via negotiation either before or after the auction.
This is particularly prevalent in a flat market – and very much the trend in our current Melbourne market. Melbourne’s clearance rate this weekend came in slightly higher than previous weeks at 60%, however this percentage includes all properties that were sold before and on the day via pass in negotiation – and from my own experience this is the majority not minority.
So it was therefore no surprise to see only two of The Block homes sell on Sunday night (one under the hammer and another via negotiation) and – as is typically the case with passed in properties – I expect the remainder will sell over the next couple of weeks. However, with low confidence, and stock levels not producing an abundance of quality property to really inspire purchasers to part with their cash, the key to securing a good deal is firmly focused on a buyer’s ability to assess a home’s true value and successfully negotiate the purchase. It’s impossible to teach negotiation without employing practical experience. However, if you want to place yourself in the box seat, arm yourself with as much information as possible. Here are a few tips to help along the way.
There are three numbers involved in real estate negotiation, and it’s important to get a rough idea of each before you formulate your negotiation strategy. What’s the property worth to you (market value + intention of use – is it an investment or your home for the next 20 years)? What’s it worth to the vendor – (where’s the vendor’s expectation? Are they expecting a premium due to a costly renovation)? What’s it worth to other buyers – (how fierce is the competition)? The first question is easy; however the other two will take more assessment. Start to gather information early, because the answers will help you assess the timing of your offer.
Try to establish why the vendor is selling. The agent may not be forthcoming if you ask directly, however questions such as “What settlement suits your vendor?” can give clues. A longer settlement may signify they have not yet bought, while a shorter settlement may indicate they’re under time constraints to secure a deal. Vendors will sometimes accept a lower price if settlement terms are favourable – especially if they’ve purchased elsewhere. Use the information wisely.
Note the property’s appearance. If the home is vacant (previously tenanted), you can assume it’s owned by an investor and they’ll probably preference a quick deal. Going in with a lower price sweetened by a short settlement may be the way to proceed. However, if the house has been professionally furnished with show home written all over it, vendor expectation is likely to be high and they’re unlikely negotiate at the bottom end of the price range, especially at the beginning of the sale process. In this circumstance, should you want to make a pre-auction offer, wait until the last week of the campaign, during which the selling agent will have hopefully tapered vendor expectation to meet the market. There are many options and shades of grey, but above all, timing is crucial, so think before you act.
The longer a house has been on the market, the greater the pressure to lower price. Look for those properties that have been hanging around for a while. Some houses don’t sell because they’re poorly located and don’t represent quality; however others may not have been marketed well or presented in an attractive manner. The latter can often present the best opportunity for a savvy buyer to pick up a bargain.
There’s always potential for multiple offers, especially if a house stands out from the crowd. Talk to the agent and ask him to keep you informed if he gets an offer in writing. Nothing can be done until the vendor statement is available so request a copy to be e-mailed as soon it arrives. Find out how the sales agency handles multiple offers. Some agencies only take a “best foot forward – one shot” approach. Others will favour the buyer who makes the first move by giving them a chance to increase their bid if someone offers more. Don’t be afraid to ask questions.
If you love the home the priority is to secure the property within budget, rather than risk being gazumped with lengthy negotiation. In this circumstance preparation is the key – get the documentation checked, building inspection done, and your finance in place before you make a move. An unconditional offer strengthens the chance of acceptance over a higher offer with conditions attached.
Consider employing a professional to negotiate on your behalf. One of the first lessons in negotiation is to place a “buffer” between you and the other party. This takes emotion out of the equation and provides you with valuable thinking time while your advocate deals with the usual tricks selling agents employ. Don’t be afraid to pay for experience in order to potentially save thousands on price.
Finally don’t worry if you miss out because someone paid more. Use the knowledge you gathered to help assess other homes on the market, and feel assured you’ll be better prepared next time.
Catherine Cashmore is senior buyer advocate for JPP Buyer Advocates – the largest dedicated buyer advocacy service in Victoria. With extensive experience in all matters regarding real estate, JPP successfully purchases and negotiates more than $100 million worth of property each year. www.jpp.com.au
Perhaps will also kill the reno market. 'You mean we cant double the house price with $100K worth of paint, kitchens and dainty throws?'. As for the houses in Richmond, well its still full of drug addicts and scumbags among the psuedo rich tossers who buy into 'The block' trend.
Too right. Once the dummies pull out en masse, who's left to prop up property prices? That's right, the other dummies in denial! :hubba:
August 23, 2011, 6:26 pm Damien Hansen Today Tonight
One of the biggest lessons to come out of The Block is it's not a good time to sell, but is certainly the time to seal a deal.
Polly and Waz walked away from the block with $115,000 - not bad for eight weeks’ work, but a mere pittance compared to the windfall collected by the real winners of the reality renovation series.
They're the mystery couple you've probably never heard of, not renovators but investors, and they've got $3.6 million reasons to celebrate.
Neighbours tell us George and Vicki Stoupas are enjoying the spoils of their investments in Greece, a world away from Cameron Street Richmond where the properties they once owned sit shiny and new - just waiting for buyers.
The Stoupas' paid just $24,500 for two of the terraces in 1977, adding the other two to their portfolio, before selling the derelict pads to The Block's producers.
This is not the first time the terraces have fallen flat under the hammer. All four had previously been passed in for $2.85 million dollars, reportedly one day before they were sold to Channel 9 and The Block's production company for $800,000 more.
Just as the contestants of The Block were left to learn the hard way, the real estate market in 2011 isn't following the script either, according to finance expert Noel Whittacker.
“At the moment the markets are scary. I mean the property market is down, so you've got scary headlines,” he said.
“The banks are having trouble lending money so they are very keen to get your business.”
The downturn in the market, particularly in eastern states, means while sellers are being blocked, for most the great Australian dream of buying a home is well and truly up for grabs.
“It is never a bad time to make a good investment, and with property you make your profit the day you buy,” Whittacker said.
Buyers’ advocate Christopher Koran is another expert who believes more people should be taking advantage of a softening housing market. “People are in a much better position than they think at the moment,” he said.
“You only have to look at the retail environment at the moment. People are holding back, they're not buying, and that does apply to real estate as well. It’s the confidence.”
And that's something buyers, and not just the market, need. “Be prepared to be a hard negotiator. If there is a price that it is offered at, it is not necessarily the price it is going to sell for,” Koran advised.
Veteran real estate commentator Neil Jenman warns now is the time to be sharpening your knives if you want to make a killing in the property market.
“There is an old saying in real estate and that is ‘the time to buy is when there is blood on the streets’,” he said.
“I believe whatever you have to go through to get a family home, go through it and get a family home,” Jenman advised.
“Look for a cheaper home, look for a cheaper suburb, look for a cheaper area in the suburb, and often you'll find ‘gee whiz I can get myself a nice house’.” While the latest season of The Block may have been a reality check for its contestants, it could be just the thing first homebuyers needed to keep their dream alive.
The third Block house has sold. It sold for $922,000, well over the reserve of $850,000. This is a house that was passed in at auction! This smells rather fishy. Probably bought by a real estate agency to give a false impression of market health.
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