The Block houses are set to lose more than $200,000 the moment they change hands as the value of the fancy furniture and appliances is instantly wiped out for future investors.

The five Phillip Island residences renovated on the show this year will be among more than 1360 to test the market across Victoria this week.

But they are facing a hard sell after last week’s clearance rate came in at 56 per cent, despite auction numbers plunging to just 520 in the week before the Melbourne Cup — less than half this week’s numbers.

In recent seasons Channel 9 have found favour selling to wealthy investors thanks to the extraordinary tax benefits under depreciation schedules for the properties.

BMT Tax Depreciation calculations estimate the Phillip Island homes could provide their new owners with $4.685m-$5.391m in deductions long term, despite all of the residences being advertised for just $1.7m-$1.85m.

But only a portion of those deductions can be passed on to future owners, with the show’s fancy furniture and high-end appliances removed from annual depreciation lists for any subsequent owners.

The BMT figures show more than $209,000-$285,000 — depending on the home — would be wiped off the depreciation schedules in just the first five years if a buyer tried to resell it quickly.

Adrian Portelli potentially proved the risk after last season when his $4.3m purchase turned into $3.245m as he put the home back under the hammer less than six months later.

BMT chief executive Bradley Beer said while secondary owners would still get the majority of the depreciation for the structural elements of the builds, the high-end furnishings’ deductions were only available to the first buyer under Australian property investment rules.

Prominent buyer’s advocate and Property Investment Professionals of Australia director Cate Bakos said subsequent buyers would “factor in that lost value”.

“And if depreciation benefits are a big part of your rationale for buying, you absolutely need to know what you won’t enjoy as a second buyer,” Ms Bakos said.

“It’s a huge problem for investors buying something like The Block.”

Ms Bakos added that the depreciation rules could also hit those planning to buy an Airbnb property that they would rent out but also use themselves, as they would lose the ability to claim the furniture and appliance deductions the moment they moved into the home for a weekend.

The investment expert noted this was important for regular investors to beware of, especially with the Victorian government pushing for more off-the-plan apartment sales via offers of stamp duty concessions.

Ms Bakos said the same rules applied to newly built units, meaning that investors who sought to sell to other investors would likely find their buyers reducing what they were prepared to pay for tax reasons.

Originally Published: Nathan Mawby | news.com.au | 9 November 2024

https://www.news.com.au/finance/real-estate/melbourne-auctions-the-block-properties-on-phillip-island-among-1300-homes-going-under-the-hammer/news-story/9d2770435575a086dceb25f1d8f01a89?btr=b32ce793a91859169dc1bd104891c292

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