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What Auckland's cooling housing market means for contestants on The Block

A slowing Auckland housing market could cause problems for this year's contestants on The Block: Side by Side.

Previous teams on the popular home renovation reality show sold their done-up domiciles in a red-hot property market. That has been reflected in the amount of profit made by the contestants on auction night - their earnings have steadily increased throughout The Block's history.

But property experts say the market is now starting to cool - and that could make things tricky for this year's Block teams.

The cas of the Block season 6. From left: Julia, Ali, Andy, Nate, Stace, Yanita, Ling and Zing.

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The cas of the Block season 6. From left: Julia, Ali, Andy, Nate, Stace, Yanita, Ling and Zing.

When Libby and Ben Crawford flipped their Takapuna house in 2012, they made a profit of $157,000.

By contrast, last year's champions Sam and Emmett made $380,000 on their Meadowbank townhouse.

Most of that profit is down to the teams' hard work painting, sawing, sanding, building and eating Pita Pit. But financial educator Lisa O'Brien says it's likely at least some of those profits are due to increases in house prices across the city from when the houses are first bought to when they are sold on.

"It's fairly obvious that the big part of the increase in price is the renovation, but I also think that if you're selling something in a hot market, it's faster to sell and it's easier to get a good price," she says.

But O'Brien says the market is changing, and it's no longer so conducive to property flipping.

"We've had a very, very strong 'up' period, and now the general consensus is that things are slowing down and things might not be as rosy as in previous years."

It's also become harder recently to borrow money to buy property. The Reserve Bank has restricted how much banks can lend to investors and to borrowers with small deposits. Banks are also being more cautious because they are worried that the market is slowing.

This reduces the pool of prospective buyers with the capital to buy The Block's houses.

"To me, you've got a smaller market to be able to be able to buy those houses on The Block, so I would think it's going to be harder," O'Brien says.

"I would think it would be harder to get a good price than it was in the last couple of years."

However, she does point out that being on television four nights a week provides an advertising opportunity other houses don't get.

"Any real estate agent will tell you, if you've got a fantastic marketing campaign, you're going to get a better price, and The Block has got one of the best marketing campaigns you could possibly get, in terms of selling a house. That could help significantly in terms of getting a good price."

Another difference from previous seasons is the kind of house contestants have to renovate.

This year's teams will do up terrace houses in Northcote, a suburb on Auckland's North Shore.

O'Brien says the terrace houses may generate more interest than the villas, bungalows and townhouses of previous seasons because they are at a lower price point.

"I think everything's about price point. Auckland has grown so much in value in the last half-a-dozen years, probably close to doubling in value. What cost you $500,000 six years ago now costs you $1m, and that's going to price a lot of people out of the market, because deposit levels haven't changed that much.

 

"It could tap into a more accessible market," O'Brien said.

Real Estate Investar Editor
Real Estate Investar Editor
Real Estate Investar provides intelligent software, tools and data to help you save time and make money in the residential property investment market.

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