The Block 2024: Investor fears grow as Victoria’s new property taxes threaten Phillip Island auction plans
Chaos looms for The Block’s 2024 auctions in Phillip Island, with show insiders warning Victoria’s tough conditions for property investors could scare off some of its most reliable buyers.
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Chaos looms for The Block’s 2024 auctions with show insiders warning Victoria’s tough conditions for property investors could scare off some of its most reliable buyers.
Program regulars have warned contentious land tax increases and a looming short-stay accommodation levy will both sting big-spending investors who have dominated the show’s auctions in recent history.
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Even would-be homebuyers planning to move into the heavily renovated residences are unlikely to make bold bids, with the state’s clearance rate hovering around 59 per cent last week — one of the softest faced by The Block this decade.
When this year’s contestants test the market, there will be almost 1500 other homes going under the hammer also vying for buyers.
And there are currently 200 active listings, mostly for private sale, in the Phillip Island suburb of Cowes where the show has been filmed this season. Nine of those are priced between $1.7m and $2.5m — the range in which the show could hope to lock in sales.
Wealthy investors have dominated The Block in recent years, with lucrative depreciation of the overcapitalised builds leading to significant tax write offs for landlords.
Advantage Property Consulting’s director, Frank Valentic, a familiar face at The Block’s auctions, said the show now relied on high net-worth buyers making bold bids.
“One of my clients purchased three consecutive properties in Albert Park and has been successful with them as Airbnb rentals,” Mr Valentic said.
“And there are returning buyers like Danny Wallace, David Brandi and Adrian Portelli, who bought properties in Affleck Street South Yarra, Ingle Street Port Melbourne and The Gatwick – Danny has been one of the most frequent buyers, acquiring properties almost every season, including several houses in Brighton.”
The buyer’s agent said many of these wealthy buyers would seek to sell within 10 years as they were driven by depreciation benefits, and records show a fair few do so within five years.
However, a decade-long increase to land tax that would hit buyers this year for the duration, as well as the short-stay accommodation levy aimed at recouping Covid-era government spending are expected to ward off investors.
“The looming Airbnb tax and evolving rental legislation could adversely affect The Block properties, adding a layer of complexity for investors reliant on rental income,” Mr Valentic said.
He added that he believed lower price points for this season might encourage more buyers in a silver lining for the show.
But PropTrack senior economist Paul Ryan cast doubt on such optimism, suggesting new tax laws would make the show’s relatively high $1.7m-$1.85m asking prices less attractive.
“If Airbnb represents the best use of property on Phillip Island, the higher associated costs will definitely impact the market,” Mr Ryan said.
“The changes may force investors to abandon their Airbnb plans, transitioning these homes to become long-term rentals or owner-occupied dwellings, which could drive up accommodation rates and shift holiday maker dynamics.”
Apollo Auctions director and 2018 AREC auctioneer of the year winner Justin Nickerson said the Victorian land and short-stay levy could prompt investors to pivot away from holiday home rental properties.
“And regional areas are more volatile with less supportive infrastructure and jobs to create demand ... though those with a strong tourism backbone do see a consistent influx of people,” Mr Nickerson said.
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It’s unlikely The Block will recoup what it has spent on the homes, after splashing $8.758m on the property before pumping millions of dollars into the renovations.If all of the homes sold at the top of their advertised range they would just top $9m.
Prominent buyer’s advocate Cate Bakos questioned the wisdom of investing in the properties under current conditions, especially on Phillip Island which she said could have a volatile tourism cycle and sparse off-season demand.
“The real estate market in Victoria’s coastal regions hasn’t fully bounced back post-Covid, and the additional burden of managing costs such as taxes, insurance, and furnishing makes the investment less appealing,” Ms Bakos said.
“It doesn’t make any economic sense to purchase one of The Block’s homes in Phillip Island – we’re already seeing coastal and holiday investors exiting the coast markets in rapid rates.”
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Originally published as The Block 2024: Investor fears grow as Victoria’s new property taxes threaten Phillip Island auction plans
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