Over furnished or unfurnished: The Block Sky High apartment debate
As the dust settles on last weekend's The Block Sky High auctions, the enduring question centres on the prices paid above reserve for the apartments in a former run down motel.
The sales run down was:
Apartment 5 Trixie & Johnno: $1.605 million
Apartment 4 Madi & Jarrod: $1.601 million
Apartment 3 Bec & George: $1.507 million
Apartment 2 Matt & Kym : $1.455 million
Apartment 1 Alisa & Lysandra: $1.435 million
Melbourne buyer's agent Catherine Cashmore says the marketing of the apartments were weighted towards investors with depreciation schedules and rental appraisals available.
The tax depreciation scheduled for apartment 301/142 Park Street advises purchasers could claim over $38,000 in deductions during the first full year leading to a cumulative total of $165,000 in the first five years of ownership.
However buyer’s agent Frank Valentic of Advantage Property Consulting represented owner-occupiers for each floor on auction day.
An owner-occupier who wanted to downsize bought level two and level four was rumoured to be purchased by an Albert Park local.
The quality and price of the fixtures and fittings come into question as well; with Cashmore saying they were over capitalised and coming fully furnished is a “nightmare” rather than a “blessing.”
“Unit one contains a huge double integrated fridge, an outside electric BBQ, two ovens, hydrotaps, frameless glass showers, spring-loaded cabinetry, fixed televisions all controlled by an Ipad as part of the package – and this doesn’t even touch the surface.
“The responsibility for the maintenance and upkeep of all the fixtures and fittings, as well as the furniture falls at the feet of the landlord.
“If anything breaks down, the landlord must replace the appliance ‘like for like,” says Cashmore.
However, Valentic says the furnishings are a bonus.
“It probably helped them get the result they all got, I think it’s a bonus.
“They needed to have good finishes to have people pay premium, buyers are paying for quality,” says Valentic.
It’s important to keep in mind the things owners can’t change, like the proposed plans for a three-level development next door, which will potentially disrupt the views and sunlight of level one through to three.
This is something to keep in mind for the apartments future re-sale value.
Cashmore says the space could have been utilized better than four bathrooms for a three-bedroom apartment and says the ceilings were low, which made it feel unusually compact.
For $1.2 million to $1.5 million, buyers could have purchased a single or double storey fully renovated period terrace in Albert Park, Middle Park or South Melbourne.
Cashmore says these types of property have a better chance of holding value than an old renovated motel.
However Valentic says these apartments are unique.
“They are very unique, you have a penthouse style apartment with no one else on your floor.
“It’s not easy to put a price on that,” says Valentic.
Valentic says similar sizes apartments of 200 square metres plus on St Kilda Road are around the $1.8 million mark; therefore The Block apartments are good value for money.
In terms of the reserve prices, Valentic says the reserves were set at a level that were always going to sell well.
The reserve prices were set before the renovations were undertaken and were valued by the size of the apartment, what level they were on and what views they offered.
The initial reserves prices were:
Apartment 5 Trixie & Johnno: $1.4 million
Apartment 4 Madi & Jarrod: $1.34 million
Apartment 3 Bec & George: $1.28 million
Apartment 2 Matt & Kym: $1.22 million
Apartment 1 Alisa & Lysandra: $1.16 million
“The reserves were probably set lower than market value to get results and make the show positive,” says Valentic.
Cashmore was representing a client for unit one and says the $1.435 million sale price exceeded her expectations.
Valentic expected the penthouse to go for an extra $100,000 and was the bargain of the day, offering the highest potential resale value.
Valentic says level one could prove difficult to resell once the building next door goes up.
“If the apartments were sold separately the results would be different; selling five in a row like that, you’re likely to pick up a better opportunity,” says Valentic.
Peter Hay of Hay Property Group says it will be interesting to see how the apartments stand the test of time.
“I’m not so sure they will be a good long term investment, too many people got caught up in the hype, not necessarily the quality of the property,” says Hay.
Property records show the production company, Watercress, spent $6.71 million for the four-star bizMOTEL, which closed its doors in late 2012. They retain the ground floor apartment.