A tiny strata building with development upside that is wedged between a car park and a residential building in Melbourne’s South Yarra has sold at auction for less than the price of many surrounding one-bedroom apartments.
The 47-square-metre building, constructed in the early 1990s as part of the adjoining car park, was most recently used as a car-detailing workshop and was sold ‘mortgagee in possession’ for $456,000.
A key feature of the property was the potential to extend the building by up by eight storeys, subject to council approval.
The area of South Yarra where the property is located is characterised by many modern, high-rise developments and the sale included ‘air rights’ to the space above the existing property, which is zoned ‘activity centre zone’.
But the buyer, a local investor, had no plans to act on these rights in the forseeable future, said selling agent Ryan Milivojac of CVA Property.
Instead they would try to secure a new tenant for the building, which could be used for retail, offices, storage or secure parking. The buyers were attracted by the potential yields on offer and the low-maintenance aspect of the asset.
“They’ll hold on to it and rent it out. They plan to find a tenant, and they’ll either refurbish it or keep it as its current use [depending on the tenant],” Mr Milivojac said.
He said that interest in the Daly Street property had been incredibly strong, owing to the inner-city location and the sub-$500,000 price.
There were over 30 attendees at the auction and three bidders.
“$456,000 for a plot of land in South Yarra with the the air rights to eight storeys is pretty unheard of,” he said, adding that many of the investors interested in the site had been considering adding the asset to their super fund.
That “would barely get you a shoebox apartment,” said Mr Milivojac, who estimated that a residential property in the same price bracket would deliver a lower rental return.
“We were advising an annual rental circa $22,000-23,000 per annum plus outgoings and GST would be achievable,” Mr Milivojac said.
The median price for a one-bedroom unit in South Yarra is $378,000 according to the most recent Domain Group data, while the two-bedroom median price is $655,000.
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