Kings Cross backpackers squeezed out as well-heeled downsizers continue their march

First it was the strip joints and bars being squeezed out of Kings Cross to make way for the throngs of well-heeled downsizers. Now it’s the backpackers.

Leading the charge among savvy property investors eyeing off budget accommodation properties to make way for high-end homes is businessman Theo Onisforou.

Two terraces that jointly make up the  Zing backpackers hostel were snapped up this week for $6 million — $3 million each— and sources say they were bought by Mr Onisforou amid plans to redevelop them into separate luxury homes with a lift.

One of the two terraces is expected to be a knock-down rebuild and the other a major redesign by architect Tony Chenchow, who is currently designing two luxury townhouses  in Elizabeth Bay for Mr Onisforou that are hoped to sell for more than $20 million each when complete.

Alan Levy, of Metro Commercial, said Mr Onisforou’s latest purchase taps into a rapidly growing owner-occupier market for sunset terraces.

“The old Kings Cross-new Potts Point area is still very well patronised by backpackers, however the gentrification of Kings Cross and move towards more high-end residential is gaining momentum,” he said.

Mr Levy said there was still a demand for backpacker businesses locally, citing the recent sale of a backpackers on Orwell Street for $6.982 million to a company headed by property investor Allan Feuer. “But that building was specifically built to be a backpackers so it made sense to keep it as one,” he said.

But Kings Cross will be the poorer without the backpackers, said Matt Ambler, owner of the Jolly Swagman.

“If it’s a suburb that just has luxury apartments in it, then that’ll be quite different to the bohemian and eclectic melting pot Kings Cross was just a few years ago,” said Mr Ambler.

“But as the street life has becomes more sanitised, the juggernaut of gentrification feels inevitable.

“Most backpacker operators still own their own building and most don’t want to run the business into old age so a lot of them are quite happy that the area is being gentrified because ultimately they’ll make more money from selling the property than the business.”

High-end values have soared in the past two years since local lock-out laws were introduced and developers have bought up struggling high-street bars to make way for luxury apartments.

Long-time local racing identity Max Whitby, who once ran the iconic Bourbon and Beefsteak bar and Texas Tavern, sold his Potts Point apartment this week for $12.5 million. The sale, through Richardson & Wrench Elizabeth Bay’s Jason Boon, was almost double the $6.6 million Whitby paid for the same apartment in 2012.

The boutique hotel Simpsons listed earlier this year by solicitor Keith Wherry for more than $15 million has also drawn strong interest from buyers as a private residence despite its size and scale, said McGrath’s Will Manning, who has listed it with Ken Jacobs, of Christie’s International. 

Andrew Woodhouse, president of the Potts Point and Kings Cross Heritage Society, said he would welcome some push back on budget accommodation.

“It does restore some of the equilibrium to the area because in recent years we’ve had backpacker creep as they’ve expanded into the residential market,” he said.