Melbourne’s honorary consul to Monaco, Andrew Cannon, is counting on young executives to pay rates of about $1000 a week in the build-to-rent project he is developing in Prahran.
Mr Cannon said he opted to develop the 400-square-metre site as a long-term rental asset about five years ago. The man who also developed the four-storey Monaco House in central Melbourne and the Point Lonsdale Guest House on Victoria’s Bellarine peninsula originally intended to develop units for sale on the site.
“You make your money when you buy real estate, not when you sell it,” he said. “If you’ve got really good real estate, it will stay rented.”
He paid $973,500 for the site at 424 Malvern Road, then a car metal plating workshop, in 2011.
It cost about $10 million excluding land to build the four-storey building with a net lettable area of 892 square metres. Seven of the eight apartments will have two bedrooms and there will be one one-bedroom apartment. They will range from 116 square metres to 70 square metres in size. Builder VCON is due to reach practical completion this month.
Despite the steep price, legal professionals and consulting executives were the sort of tenant who would be attracted to the development, he said. The development, with an entry hall that replicates the style and colour of a Bugatti Veyron sports car, had high-end finishes such as orange stitched leather lift interiors to reference the industrial history of the site.
Apartments will have double-glazed timber frames.
“It’s easy to find a place to rent, but it tends to be in a very large-scale development without much style or soul to it,” Mr Cannon said.
The high rental rates of the John Wardle Architects-designed project, partially funded by bank loans, meant the common concern of low yield making rented property an unviable investment did not apply, Mr Cannon said.
“The build-to-rent sector in Australia hardly exists to this point, but I think the market conditions are right for this kind of project that offers a better return for both developers and residents in the long term,” he said.
He is also counting on an imminent shortage of rental stock, once the current wave of apartment projects completes, to drive demand.
High-rise apartment approvals nationally slid to 49,444 over the 12 months to January from 53,574 in the December calendar year. In Victoria alone, approvals of attached dwellings – apartments, townhouses and semi-detached homes – fell for a fourth straight month.
“With development approvals at six-year lows, and existing properties offering less attractive returns, the apartment boom may have run its race, particularly for low-quality products,” he said.