Short-term investors not welcome

Local Docklands developer Mohan Du will no longer sell apartments to investors planning to use them for short-term letting.

An apartment dweller himself, the Capital Alliance CEO said he was taking a stand against short-stays in residential buildings because it was the right thing to do – even if it alienated short-stay investors.

“I’m very happy to be doing that because we don’t want them in the building,” he said. “To put it bluntly, if you want to do short-stay accommodation in one of our projects, you’re not welcome. Don’t buy in it. We don’t want you to buy in it.”

“But if you do want to buy in it, then you’ve got to sign the agreements and the covenants that we set. It’s a free market. If you want us to sell it to you, we can, but these are the terms. And we’re not negotiating those terms.”

“If you’re happy to sign all these documents and you still do it, then we’re happy to take you to court.”

Mr Du said his first experience of short-stay was as a resident in Southbank.

“I remember coming home with my partner often, not late, and on numerous occasions we would walk into the lift and there are a bunch of drunk hooligans,” he said.

“Do I feel safe? No. Did I feel like my personal space was being invaded? Of course I did. Because, when the lifts open onto my floor, nothing is stopping anybody from following me out into my home.”

Mr Du says market considerations weren’t a factor in his decision to place a restrictive covenant on titles on his current “The Docklands” mixed-use development in Waterfront City and all future residential developments.

Purchasers must accept a restriction on title in the plan of subdivision, which applies to all residential lot holders and their successors as well as a personal contractual guarantee from each purchaser to Capital Alliance that the apartment will not be used for short-stay and an obligation on each purchaser to grant restrictive covenant over its apartment in favour of Capital Alliance.

But, he said, he had been pleasantly surprised by the response from the market.

“From the positive response we have received from this, it is clear that this is the right thing to do,” he said.

“For us, it’s a very conscious decision. We didn’t have to do it. We would like to think that we’re doing the right thing.”

“I didn’t think it would be a selling point, because this is a conscious decision we have made ourselves. But buyers are loving it, because apartment living should be your home,” he said.

“This is not a sales pitch, but we’ve sold our large two and three-bedroom apartments. There are zero left.”

Strata expert Tom Bacon agrees with the protections that Mr Du has introduced and predicts it will be a winner with buyers.

“Mirvac did this with the Yarra’s Edge development to ensure that it could not be used for short-stay apartments, and it has been very successful down there,” he said. “It is very rare that developers register these types of covenants, but they absolutely do work.”

“The developer in this case is quite clever, in my view, to be offering this. I’m sure the development will sell quite well, because owners will be assured that their neighbours will not be short-stay hotel style guests.”

“In my view, a lot more developers should be looking at these types of options, especially in Melbourne where there is a lot of choice out there for discerning buyers.”

Mr Du said the market would ultimately determine the success of his actions.

“At the end of the day, judgement will be provided by people buying an apartment,” he said.