Mr Farrah and fellow businessman and property owner Ivan Peppe bid against each other for several minutes at an auction conducted by Doug May, bids rising by $50,000 or $25,000 each time.

After Mr Farrah bid $2 million, Mr May asked if anyone would top that and Mr Peppe shook his head.

The price for the former ANZ Bank surprised real estate observers who had been expecting a figure of $1.5 million to $1.7 million, given that the present rent is $176,719 a year.

It is believed this was the first time a retail property in Dean Street had been sold for as much as $2 million.

Later Mr Farrah said the bookshop and Sian Orchid Cafe had leases until 2014 and he would look first at renovating the first floor, which had been vacant for several years.

“I’ve bought it as a long-term investment,” he said.

The vendor was 500 Dean Street Pty Ltd, a company associated with Les Beard, who had paid $665,000 when the bank sold it at auction in 1998 and subsequently remodelled it for tenants.

The heritage-listed building was originally a Union Bank branch and residence for the manager, James Stephen, father-in-law of the artist Sir Russell Drysdale.

It was designed in 1906 in the Queen Anne-Federation style with tall chimneys and Marseilles terracotta roof tiles by architect Walter Butler and built by Logans.

High narrow windows are complemented by a small balcony over the arched main entrance.