The Block: What shock Omar, Oz finale shows about the property market, according to Frank Valentic
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The shocking outcome of The Block’s auctions exposes the deep problems facing the wider Australian housing market, property experts warn.
Two of the five properties up for grabs on The Block’s auction day were acquired, while two of the three sold yielded relatively meager profits.
The three properties sold were all taken over by the one buyer, Melbourne-based IT entrepreneur Danny Wallis.
Mr. Wallis paid $5.6 million for the winning Omar and Oz property – well above the target price of $4 million to $4.4 million in what experts describe as an “extraordinary” sale.
Frank Valentic, of Melbourne-based Advantage Property Consulting, said what happened on The Block was ‘reflective of the whole market’.
“Three out of five homes have been sold, two out of five have succeeded, so it was a 60 per cent clearance rate,” he told the Daily Mail Australia.
“In Melbourne, the clearance rate has been between 60 and 70 percent in the last six months, so I think (what happened on The Block) is in line with market conditions.”
Dylan (left) and Jenny (right) were very disappointed that their house did not reach the reservation and was passed on
Mr Valentic said Melbourne’s cleanup rate was 80 to 90 percent 12 months ago.
“So it’s become more of a buyer’s market now,” he said.
“We were in a total seller’s market with the Covid factor 12 to 24 months ago.”
He said there is no immediate prospect of a sharp recovery in house prices.
“There will be fewer bidders at auctions,” he said.
‘You saw that there were no auctions on The Block with more than two to three bidders.
“Twelve or 24 months ago, when the market was flying fast, I went to auctions where there were five to eight bidders,” said Mr Valentic.
Sydney-based financial analyst Martin North agreed with Mr Valentic on the state of the market.
“We are now seeing declines in every major market and now regional markets are also declining, so there is almost no hiding place,” he said.
“The momentum of real estate (sales) is declining, real estate prices are clearly falling and so (sellers) have to meet the market.”
Valentic said it will remain a buyer’s market until interest rates stabilize.
“I think sellers will be in a bit more pain over the next 12 months until interest rates peak and then start to level off and fall again,” he said.
Frank Valentic, of Melbourne-based Advantage Property Consulting, said what happened on The Block was ‘reflective of the whole market’
Omar and Oz’s house (pictured) sold well above reserve price on The Block’s auction day
Ankur and Sharon’s house (pictured) was also passed, because they had not made the reserve
Despite falling property prices, there will always be exceptions, Mr North said.
“As with anything, there’s always a strange trait that surprises us, because we still have some people who have savings from Covid (lockdowns) etc. in recent years,” he said.
“Sometimes people want to buy, not just because it’s (the right price), but because it’s actually the right property for them,” he said.
Some viewers of The Block were amazed that there could be such a difference in prices between five houses on the same street in Gisborne, 55km northwest of Melbourne’s CBD.
But Mr North explained that close-knit properties can have dramatically different characteristics, including the orientation they face.
‘The layouts can be completely different and that can of course lead to a considerable (price) difference,’ he says.
Mr Valentic pointed out that although the houses were 10 to 13 acres in size, they were very close together.
“In one house it was only 40 meters to the next,” he said.
‘When you buy a country house, you don’t want privacy, you don’t want to see your neighbor.’
Rachael and Ryan (pictured in front of their home) sold their property for $4,250,000
He described the sale of Omar and Oz’s $5.6 million real estate as a “crazy” result.
‘(It) was a result that was out of the box. I think (Adrian Portelli, one of the bidders) was also a friend of the owners. It was a bit of a bizarre result,” said Valentic.
“Obviously he had the money to buy it, but he also pushed Danny (Wallis) way beyond what those properties were worth.”
Mr. Portelli’s aggressive bidding meant that Mr. Wallis ended up paying a whopping $5,666,666.66 for the four-bedroom, 10-acre property.
That made Omar and Oz instant millionaires with a total profit of $1,686,666.66 – the biggest win in The Block’s 18-year history.
Tom and Sarah Jane’s house (pictured) sold for $4,100,000.99, which was less than they’d hoped
Asked about the near future for house prices, Mr North said: ‘The question to be asked is where interest rates will be.’
“Most people, not everyone, but most people who want to buy a home need a mortgage,” he said.
“Interest rates have risen enormously. The RBA (Reserve Bank of Australia) said it expects inflation to stay with us for much longer and interest rates will likely have to stay high.
“(For) the next two years or so, interest rates are likely to be higher than where they are now.”
He said that meant the amount of money the average person could borrow was? ‘about 30 percent of the peak’.
“That will put downward pressure on property prices,” he said.
Mr North said there were three scenarios for where the market was headed.
“At best, rates will stay below 2.95 percent and fall next year, and inflation is slowing for RBA expectations, while wages are rising faster and (there is) no recession in Australia,” he said.
Omar and Oz are pictured in front of their home, which sold for $5,666,666, way over its reserve price
‘The basic scenario is that the interest rate rises to 3.5 percent, so the mortgage interest rate from 6 to 7 percent.
“They will remain high in 2023, while inflation will remain above target until 2024, and no recession in Australia.
‘The worst part is that the interest rate rises above 4 percent, with a mortgage rate of 7 percent or higher, it will remain high until 2024, along with inflation.
‘Wage growth stagnates due to recession in Australia and interest rates fall later.’
Ankur and Sharon are pictured at their house which, disappointingly for them, was not sold
On The Block, Dylan and Jenny’s house was one of two who couldn’t make a backup and was passed.
The pair were called “the most positive couple on The Block” by front man Keith, but Jenny was not positive about the outcome of the auction.
“I’m p***** from TBH,” she told 9Entertainment moments after their auction.
She was bitter about Omar and Oz’s winning auction and felt that they played Mr. Wallis against Mr. Portelli and made a huge profit of $1,586,666.66.
“They knew Danny is very competitive,” Jenny explained.
Adrian Portelli’s aggressive bid marked the final buyer and Danny Wallis (pictured right) paid a dazzling $5,666,666.66 for the four-bedroom, 10-acre property.
“I just feel like they were playing the game all the time and it shows. It’s not what you know, it’s who you know and it’s clearly paid off, hasn’t it.”
Jenny said she had “a gut feeling” that it would be a lackluster result from “the moment they sat down for reserves.”
“I know[the houses]are worth $6 million, but people don’t have that kind of money right now,” she said.
Despite the apparent gloom ushered in by The Block’s results, there was a bright spot this weekend in Sydney, where the 69.7 percent cleanup rate was the highest since mid-April.