Lights, camera, action. Property is back on television. Not the overly earnest The Renovators, which has been dropped from the Channel 10 schedule, but the perennial favourite, The Block on Channel 9.
It’s on the air for the fifth time since 2003.
Get business news first
Sign up to SmartCompany’s daily newsletter
Monday night’s 1.4 million debut ratings wasn’t quite matched Tuesday when a still very attuned 1.3 million tuned in for the preliminary knockout shows, which have eight couples become the final four who take viewers through the remaining 10 or so weeks. Interestingly it was the Melbourne viewers who strayed away on the second night dropping from 508,000 to 466,000. The Sydneysiders tuned in in roughly equal numbers – 404,000 on debut and 390,000 on Tuesday night.
The Block‘s 2011 airing – which was ramped up to a remarkable six nights a week footage – ended with a dose of reality at its auction finale.
Three of the four houses in the Cameron Street, Richmond offering failed to sell under the bright lights of the auctioneer’s hammer.
There’s little doubt the producers of The Block 2011 paid above-market rates to get four houses in a row, given they are a rarity.
It could again face the same challenges of getting overly enthusiastic buyers to match the outlays incurred in The Block 2012, with the four South Melbourne cottages in the current series costing $3,025,000 last June, plus subsequent ambitious renovation costs.
Not that there’s any stopping the production company, which has already spent about $4.4 million on four semis in Bondi for the next season.
Of course, the criteria for success is the ratings, not necessarily the sale price return.
And the fact that so much effort by the zealous contestants can go unrewarded no doubt appeals to some viewers.
The Block could of course set artificially low reserves for the auction price hurdle, but there’s been no indication of a change of heart from the producers, Watercress Productions.
Last year’s Channel Ten series of The Renovators sold all six of its Sydney offerings on the night, but half of them lost money when you factor in stamp duty and renovation costs.
The prices paid by the producers of The Renovators 2011 series were not excessive, but they went awry in their allowances.
They took the purchase price and then the stamp duty costs into their calculations before adding the 20% renovation outlay.
The rule of thumb is to keep the reno spend to less than 10% of the purchase price of a home. So spending 20% of the expanded purchase costs was always going to be a hard ask to match.
And too much a challenge for such overcapitalised properties hitting a soft Sydney market in quick time.
Melbourne’s market is particularly to read, and when the South Melbourne auctions come winter, who’s to say how chilly the sale conditions will be.
I’ve yet to see the interiors, but two questions immediately spring to mind from a drive-by perusal.
Are the third-floor extensions a little over the top for the Dorcas Street locale? What buyer spending limit arises from the absence of car parking?
Of course there are other factors in determining buyer interest. Like energy usage saving initiatives. And no doubt investors will be seeking the depreciation reports for the four homes. They were a goldmine for investors seeking to maximise returns on last year’s Richmond offerings.
This article first appeared on Property Observer.