The Block 2015: investors could claim millions in tax savings

It’s just a week before hammer time for The Block apartments in South Yarra, and it won’t just be the contestants who will be reaping a windfall. 

Couples competing this season had to renovate an infamous budget motel on the corner of busy Punt and Commercial roads into five glamourous apartments befitting the posh postcode. 

The Block’s producers paid $6.25 million in October last year for the former Hotel Saville. 

A complete makeover has rejuvenated the site, with a trendy cafe opening on the ground floor and a roof-top communal area with a gymnasium and cinema.

An investor who buys one of the apartments would be able to claim an average of more than $1.5 million in deductions, analysis of BMT Tax Depreciation’s depreciation schedule shows. 

The buyer would be eligible for deductions for the installation of both structural components and plant and equipment assets.

BMT Tax Depreciation’s chief executive, Bradley Beer, said investors can always claim more on furnished properties because plant and equipment assets depreciate at a faster rate. 

Though developers generally looked to make a profit, he said the cost of renovations and additions on The Block apartments would be greater than the purchase price – if they sold for close to their quoted range.

He said this was because The Block was a TV show about ratings, rather than a money-making exercise. 

Of the five apartments, Dean and Shay’s penthouse would have the highest depreciation deduction over the 40-year life of the property.

The buyer of 6/1A Affleck Street could claim a minimum of $62,735 in the first year and a total minimum of $1,621,688 over the life of the apartment. The cash return would depend on the buyer’s tax bracket. 

The higher amount of deductions can be attributed to items such as the spotted gum dining table and bench seat in the outdoor terrace and the concrete and reclaimed teak dining table. 

“As an investor, you’re looking for an appreciation of value and rental return all the way through, but the cash flow is definitely supported well by depreciation in this case because so much money is spent on the apartments,” he said. 

RT Edgar director Glen Coutinho, who is guiding more than $1.3 million for Suzi and Vonni’s apartment, said inquiries were largely from investors, including some looking to turn it into an Airbnb listing. 

“One of the main reasons is because it’s turnkey; so it’s fully furnished – it’s all set up, ready to go,” he said. 

With five apartments up for auction, Mr Coutinho said investors could grab a bargain because the buyer pool was reduced. 

Greg Hocking, who is looking after the Andrew and Whitney’s apartment, said response had been mainly from owner-occupiers, given its location.

From an investment perspective, Mr Hocking said the scarcity factor of the apartment would drive its capital appreciation.

“And while the structure is much the same in terms of its volume, it’s a complete makeover and holds new context for its new life, which is being very much welcomed by the local residents,” he said. 

Mr Hocking is guiding early $1 million for 3/1A Affleck Street.   

Last Sunday, thousands of The Block die-hards lined up to inspect the apartments, with the most passionate fans queueing up for three days. 

The five apartments are pencilled for auction on Saturday.