TV auctions ‘blowing out prices’ as emotions run high

A senior property industry figure says that homebuyers intent on getting a slice of apartment action are paying too much for the homes featured on television.

Australand Property Group’s national general manager of business development, Rob Pradolin, believes that homebuyers are getting caught up in television-generated hysteria.

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A very good example is a popular show like The Block, he says, which captivates viewers who may believe the hype.

“People get caught up in the hype and pay too much for The Block apartments,” Mr Pradolin says. “If you have emotion involved already and then the TV hype on top of it, it can be a recipe for disaster for buyers.

“It’s great marketing but it can create a situation where people pay over what the market believes it (the apartment) is worth.

The Block Glasshouse“Programs such as The Block are creating aspirations for people to copy what they see.

“This gives rise to a tendency that people may overpay for apartments that are auctioned as they have some cache when the purchasers speak to their friends and say that they bought an apartment that was featured on The Block. It’s all about ego.”

The Australand chief says the ego factor was confirmed recently when an analysis was done on some of the re-sales that have occurred after the original sales.

“These apartments have gone for less than what they were first bought; and this is in a rising market as well,” he says. “Emotion does play a part in buying property and people do pay over what the market price is at the time.”

Mr Pradolin says while shows like The Block may boost demand for trendy townhouses and apartment living, but only a small proportion of the population can afford them.

“So it still stays aspirational for the majority of our population,” he says.

PRDnationwide founder and managing director Tony Brasier says that properties which have sold on TV go for more than the median home price in the area they are built in and then for less when they are later re-sold.

“According to PriceFinder data, since season one in 2003, 10 of the properties bought on The Block auction night have been re-sold,’’ Mr Brasier says.

“Of the 10 re-sellers, three did not make a profit. Two of them had a $100,000 or more negative price difference; indicating immediate profit loss. In season two, two out of the four houses were re-sold at a price that was lower than the suburb median price.

The-Block-Glasshouse-Crowd-2014“The four season one (2003) properties in Bondi Beach, New South Wales, were, on average, purchased at auction at a price 32.66 per cent higher than the suburb median.

They were then re-sold at a price 18.71 per cent higher than the suburb median.

“Season two’s (2004) four properties in Manly, NSW, were, on average, purchased at auction at a price 0.76 per cent higher than the suburb median. They were then sold at a price 0.55 per cent lower than the suburb median.

Mr Brasier says that many buyers and investors think that “a profit is a profit”.

“However, when you consider the entry and exit costs, and compare the median price at time of the auction and at the time of the re-sale, based on properties of similar nature, you’ll see that relative to the market when purchased profit isn’t maximised,” he says.

“If they were, on average, bought at 7.26 per cent higher than the suburb median and re-sold at 5.22 per cent higher price than the suburb median, there is a loss in profit based on the price originally paid.”

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