Could The Block NZ series 3 be a leap too far?

I must confess I had not been gripped by the TV series The Block, I am more a Grand Designs person.

However, I can see the appeal and, based on the level of interest evidenced from the recent open homes, TV3, the production company and the sponsors must be delighted. It appears to be the golden goose that just keeps on delivering.

I hate to be the Grinch to rain on their parade but I fear that series 3 of The Block is not going to end as happily as the first two series, with a successful clean-sweep of auctions on the night. I think the third series is going to be a leap too far and one, if not possibly all of the properties may end up not selling at the reserve and thereby being passed in.

If you need a reinforcement to this view, then look no further than the most recent Australian series of The Block in which apartments in Melbourne's suburb of Prahran have struggled to meet the reserve set at the auction as the market they are competing in is flooded with similar apartments. This recent article provides a vital insight into the challenges the Australian series has faced in marketing these very unique apartments.

For New Zealand, the issue for these four new properties is not in my judgement the same as Australia. It is not down to marketing to stand out in a crowded market – the issue is simply there is insufficient demand.

The original series of The Block NZ in 2012 delivered four renovated houses in Takapuna, which sold at prices between $800,000 and $961,000. The second series in 2013 delivered four renovated houses in Belmont, which sold at prices between $970,000 and $1,126,000. The current third series has four renovated houses in Point Chevalier, with a price expectation of $1,450,000. This figure is the search price indicator from the Realestate.co.nz website. This price level is 40% higher than the last series and puts these houses in a wholly different segment of the market.

This price expectation is a big ask for four properties in the same subdivisions to be sold at auction on the same night. To find a single buyer for this type of property in Pt Chevalier at this time, at this price point is probably quite likely. To find two is less likely and to find four is a huge task in my opinion. Simply put, the higher the price point, the smaller the market demand and the pool of prospective buyers. Add to this the media profile which, while great for a TV show, does have the ability to be a negative factor for potential buyers, who value privacy when looking to spend over a million and half dollars and may well not want to be associated with a TV make-over show when there are other "new" renovations on offer. All of these factors drive a higher likelihood of a less impressive auction event.

To prove my point, let's examine some data. Barfoot & Thompson kindly provides insight into monthly sales by price level. As the largest real estate company in Auckland, it accounts for about 40% of sales so therefore it is possible to estimate the average number of property sales across Auckland at each price point, reflective of the properties for sale during each series of The Block.

So based on the sales data at the expected price point of $1.45 million, there are about a quarter the number of buyers than those at the $800,000 to $1 million bracket of the 2012 series.

A house purchase at $1 million is a serious consideration, at $1.45 million it is ever more of a significant consideration. These prospective purchasers are not super-fans of the TV series, buying a memento of the series to show off to their friends; they will be property buyers, buyers who are discerning, judgemental, critical, cautious and private. 

Time will tell but I will watch as will many hundreds of thousands of viewers on auction night to see if they really can sell over $6 million of real estate at a live TV auction.