Demolishing a crumbling "ghost house" at Red Hill in Canberra will prove to be a lucrative exercise for a foreign government.
Macedonia is planning to sell the former Yugoslavian embassy in Nuyts Street, a long-standing eyesore in the neighbourhood, to allow developers to build luxury townhouses.
The building was handed to Macedonia in an international carve-up of the former socialist state's assets.
The new owners took control of the building in 2011 but did not use it as an embassy.
Macedonia hopes to gain more than $1 million from the sale of the fortified, rambling building, in one of the national capital's prime locations, to fund construction of a new embassy.
Some diplomats had lived in self-contained apartments in the building but it had been vacant since 2003, Macedonian ambassador Vele Trpevski said.
The building is not in one of the prescribed areas in Canberra for diplomatic missions - Deakin, Yarralumla or O'Malley - but was able to operate after receiving dispensation from the ACT government, he said.
His government is leasing a building at O'Malley for its embassy, at a cost of $5,700 a month.
Mr Trpevski said he had successfully applied for dispensation to use the Red Hill building as an embassy but said it was too large for his purposes.
"It's a very big embassy and also the building is not up to date, a lot of the roof is damaged, the heating is based on oil in the basement so it is not feasible for us to use it," he said.
"In my estimation, it would cost $150,000 to get it compliant with standards and then there may be no extension of the [dispensation] permit.
"Fortunately for us, the area where the embassy is, is a highly valuable place in the ACT and it is zoned for medium density so you can build townhouses there.
"I have suggested to my government that the best way forward is to sell that place and buy another place for an embassy.
"It looks to us that that is the best way to go and I have started the procedures."
Mr Trpevski said the property had been valued at $1.2 million but could fetch slightly more if a developer was able to secure adjoining properties.
"If you include the houses nearby, it makes it a very big place for redevelopment," he said.
"It would be easy money for any developer because just our lot is 1,300 square metres."
Mr Trpevski is negotiating with a well known real estate agency to market the property when final approval for the sale is given by his government.
"They're already told me they have three or four developers interested to buy it and build townhouses," he said.
"It will definitely come on the market in September.
"In my estimation, when we sell the Red Hill property, we will be able to buy something very similar to this [O'Malley] property."
He said the former embassy was strongly built, with thick concrete walls, but no asbestos.
A spokesperson for the Department of Foreign Affairs and Trade confirmed the embassy of the former Yugoslav Republic of Macedonia had sought permission to move its chancery to Red Hill and the request was approved.
However, the embassy advised the department in March 2012 it wished to relocate its chancery from Yarralumla to O'Malley.
