Docklands VIC Property Investment

## 1. Investment Verdict We rate Docklands, VIC as a Buy, with the single most important number justifying this verdict being the 3yr growth forecast of 13.5%. This indicates a strong potential for capital appreciation in the medium term.

## 2. Market Overview The median house price in Docklands ranges from $953,000 to $2,700,000, while the median unit price is $630,500. The market is experiencing a boom cycle, with 1yr price growth of 9.2% and a 5yr CAGR of 1.6%/yr. However, the days on market are not available, making it difficult to assess the current market speed. For buyers, the relatively low owner-occupier rate of 30% may indicate a higher proportion of investors, potentially leading to increased competition. Sellers, on the other hand, may benefit from the current boom cycle, but the above-average vacancy rate of 3.5% could signal a rental oversupply risk.

## 3. Rental Market The rental market in Docklands has a vacancy rate of 3.5%, which is above average, indicating a potential rental oversupply risk. The median weekly rent is $715/wk, with a gross rental yield of 3.9%. The rental demand is rated as low, which, combined with the relatively high vacancy rate, may pose challenges for investors seeking to secure tenants. However, the population of 15,495 and the strong population growth may attract new development approvals, potentially increasing demand for rentals in the future.

## 4. Short-Term Rental Opportunity The short-term rental market in Docklands offers a median nightly rate of $444/night, with an occupancy rate of 48%. This translates to an estimated annual revenue of $81,024 (assuming 365 days of potential rental and 48% occupancy). Compared to the long-term rental market, which offers a gross yield of 3.9%, the short-term rental market may provide a higher return, but it also comes with higher management fees and potential void periods. Investors should carefully consider their investment strategy and target market before deciding between long-term and short-term rentals.

## 5. Infrastructure & Growth Drivers Docklands benefits from its well-connected inner-city location, with several major infrastructure projects under construction, including the Metro Tunnel, West Gate Tunnel, North East Link, and Suburban Rail Loop East. These projects are likely to drive growth and increase demand for properties in the area. The strong population growth and moderate supply pipeline also indicate a potential for long-term capital appreciation.

## 6. Bull Case If the current market conditions hold or improve, the upside scenario for Docklands is promising. With a 3yr growth forecast of 13.5%, investors may see significant capital appreciation. Additionally, the potential for increased demand driven by infrastructure projects and population growth could lead to higher rental yields and reduced vacancy rates. Assuming the median house price range remains, investors could see their property value increase by $124,950 to $364,500 (9.2% to 13.5% of the lower and upper bounds of the median house price range) over the next three years.

## 7. Risks There are several risks associated with investing in Docklands. The flood risk is HIGH, according to the state planning portal overlay, which may lead to elevated insurance costs and mitigation/BAL requirements. Investors should order a property-specific flood certificate before committing to a purchase. The above-average vacancy rate of 3.5% also indicates a rental oversupply risk, which may lead to reduced rental yields and longer void periods. Furthermore, the moderate supply pipeline may lead to increased competition in the rental market, potentially reducing demand and rental yields. The unemployment rate of 6.9% is also a concern, as it may impact the local economy and demand for properties.

## 8. The Play For investors looking to enter the Docklands market, we recommend targeting properties with a minimum gross yield of 4.0%. Given the potential for capital appreciation, investors may consider holding onto their properties for at least three to five years to ride out any market fluctuations. Watch signals for this investment include changes in the vacancy rate, rental yields, and population growth. The heritage overlay confirmed by the state planning overlay may restrict external works and granny flat developments, so investors should factor in potential additional costs and approval processes. The recommended strategy is to focus on well-located properties with strong potential for capital appreciation and rental yield growth, while carefully managing risks associated with flood risk, vacancy rates, and supply pipeline.

This analysis is for informational purposes only and does not constitute financial, legal, or investment advice. Seek professional advice before making investment decisions.