Joint venture partners, Melbourne based developers Bayport Group and Elite Property Group have paid $7.225 million for a prime residential development site at Hughesdale in Melbourne's inner south-east with plans for a new townhouse project.

According to selling agents, Savills Julian Heatherich and Jesse Radisich , the price paid for the site reflected the very competitive market for residential development sites in Melbourne's south-east.

"Melbourne's surging population, sympathetic new zoning rules, and low interest rates are driving strong competition for apartment and townhouse sites, particularly in the east and south-east which is experiencing the strongest residential growth.

"Sites with dual street access and close proximity to shops, schools, transport and other essential services, such as this property, have fared the best and that is reflected in the enormous amount of enquiry and the price paid." Mr Heatherich said.

The 3,456 square metre site which comprises properties at 568 Neerim Road and 34 Poath Road, offers a combined 121 metres frontage and is zoned General Residential 2. It is located about five minutes drive from Australia's largest regional shopping centre at Chadstone and Hughesdale Railway Station.

Spokesman for the joint venture partners, Elite's General Manager Development, Nathan Cunningham, said plans for a townhouse development would be submitted as soon as possible.

Mr Cunningham said the deal followed the joint venture partners' purchase of a site at 235-243 Normanby Road, South Melbourne, earlier this month, for $17.81 million with plans for a 40 storey apartment tower on the site.

He said the transactions were supported by Elite and Bayport's divestment of a portfolio of four industrial assets for $50 million in an off-market deal to a Fife Capital-managed private investor fund late last year.

Mr Heatherich said the Hughesdale property was sold with vacant possession by vendor, community services organisation, MonashLink.

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