Palatial spreads kept empty? That's rich

They are Toorak's ghost mansions: grand houses that have sat unoccupied behind chained gates and boarded-up windows for years, even decades.

As Melbourne struggles with a housing shortage, some of the city's finest abodes are home to nothing more than dust and cobwebs.

Take, for example, a French Renaissance-style mansion in St George's Road that Asian-based property tycoon David Yu bought in 1991 for $5 million and has left unoccupied since.

The land alone, believed to be one of Toorak's largest allotments, could now be worth as much as $35 million.

Plans by Mr Yu to build a five-storey apartment block on the site were rejected a decade ago.

"He's just sitting on it," Kay and Burton director Ross Savas said. "He wont sell it; we've approached him hundreds of times. It's very valuable."

A drive around the city's priciest suburb reveals land banking is long established among the rich.

Ghost mansions and land banks are sometimes held by those planning a tennis court or swimming pool. Other people are waiting for their children to grow up. Many are speculating that the price of Toorak land will only rise.

"Some of the houses we look after, they don't even want to rent them," Mr Savas said. "They don't want the hassle of a tenant."

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Such properties tend to cluster around the stately homes of prominent Melbourne identities and businessmen — the kind of resident who does not want a block of flats built next door or a nosy neighbour, and has the money to buy any adjacent property that comes onto the market.

At a white mansion in Irving Road, next door to trucking magnate Lindsay Fox, the curtains are drawn and the mailbox slot is taped over. Years of junk mail is wedged in piles in the fence.

Behind the mansion are several vacant sprawling house blocks, where weeds have replaced homes demolished years ago.

A house in Albany Road, next door to one of Australia's richest men, Solomon Lew, was bulldozed after being bought for $4.8 million in 1992. Rumour has it Mr Lew wanted a tennis court, but today, the block has only a free-standing carport and a car with a protective cover that reads "Bentley".

Land speculation explains the history of a grassy knoll in Irving Road. It has changed hands every few years and not been built on. It was last bought by Christiana Bertocchii for $3.7 million in 2007.

Buyer's advocate David Morrell said "smart money" had been land banking for a long time, but there had been extra impetus since the introduction of capital gains tax.

"A lot of my clients don't like neighbours, and it's a clever move to land bank." Mr Morrell said. "Your principal place of residence becomes capital gains tax free and they merge the titles. As far as investment goes, land in Toorak is as good as you are going to get, and it's probably the only suburb you see land banking except for in outer Melbourne."

Mr Savas said Kay & Burton sold part of a long-established land bank in Hopetoun Road last week. It has been nothing more than a tangle of grass and wild shrubs for decades.

"There are some very wealthy families that have bought these properties, and they are not doing anything with them," Mr Savas said.

"The Gandels, Besens, all of the big families have large land holdings that they're setting up for their children in the future … like the Baillieu family had enormous land holdings and just held them for years and years. We've basically sold most of (the Baillieu) holdings in Toorak, but I'm sure they have others."