--- title: "Doncaster, 850 Square Metres, RGZ Zoning. Should You Invest?" description: "Detailed investment analysis of an 850sqm Doncaster house. RGZ zoning, 70% owner-occupier, 47% unit stock, 24% 10yr growth. Conversion potential from 2.6% to 4%+ yield." author: Yan Zhu date: 2023-01-26 category: Finance & Tax url: https://premiumrea.com.au/blog/doncaster-850sqm-house-investment-analysis tags: ["Doncaster", "suburb analysis", "RGZ zoning", "development", "rental yield", "Melbourne property"] --- # Doncaster, 850 Square Metres, RGZ Zoning. Should You Invest? *By Yan Zhu, Co-Founder & Chief Data Officer at PremiumRea — 2023-01-26* > Another DM, another Chinese suburb, another familiar conversation. Doncaster, 850 square metres, and the question is always the same: is it worth the money? I pulled up the data and the answer is more complicated than most people want to hear. Another DM, another Chinese suburb, another familiar conversation. Doncaster, 850 square metres, and the question is always the same: is it worth the money? I pulled up the data and the answer is more complicated than most people want to hear. Doncaster sits in that awkward zone where the suburb has genuine appeal for owner-occupiers but the investment mathematics are, at best, lukewarm. The trick is working out whether the property-specific angles can overcome the suburb-level headwinds. Let me walk you through exactly what I found. ## Suburb snapshot: Doncaster by the numbers Affordability ratio: the median house price in Doncaster is around $1.5 million against a median household income of roughly $113,000. That gives you an affordability multiple of about 13 times income. Anything above 12 is genuinely stretched, and it means the buyer pool is heavily weighted towards dual-income professionals and cashed-up overseas buyers [1]. Owner-occupier ratio: 70 per cent. Decent but not exceptional. I prefer to see 75 per cent or above for suburbs in this price bracket. At 70 per cent, you have a meaningful rental population, which can indicate softer buyer demand during downturns. Unit proportion: 47 per cent. This is high. Nearly half the dwelling stock in Doncaster is units or apartments. That is a structural drag on house prices because developers keep adding supply. Every new apartment building erected along Doncaster Road chips away at the scarcity premium that drives house price growth [2]. Neighbouring supply: Templestowe sits next door with large established lots. That supply pressure from adjacent suburbs means Doncaster does not benefit from the constraint effect you see in suburbs like Glen Waverley or Balwyn where almost every neighbouring suburb is equally expensive. Ten-year growth: 24 per cent. Better than Bulleen but still below Melbourne's average. For a suburb at this price point, I would expect 30 per cent minimum to justify the capital commitment. Vacancy rate: 2.6 per cent. Marginally above my 2 per cent threshold. Not alarming, but not tight either. Days on market: 27 days. Properties move reasonably fast, suggesting demand is present but not frantic. ## The property: land value, zoning, and the hidden upside The specific property that landed in my inbox sits on 850 square metres. At Doncaster's current land rate of roughly $2,000 per square metre, the land component is worth approximately $1.7 million. The asking price is around $1.5 million. Land value ratio: 113 per cent. You are buying land and getting the house for free. On this metric alone, the property screams buy. When land value exceeds the purchase price, the building is effectively a free option on future development or renovation returns [3]. Zoning: Residential Growth Zone (RGZ). This is significant. RGZ allows higher-density development compared to General Residential Zone. The catch: the property fronts a major road, which means traffic noise. The property next door has already been developed into townhouses, which tells you the council is approving this kind of development in the immediate area. But there is a complication. Because the neighbour has already developed, any new multi-storey build on this site would likely require upper-level setbacks to avoid overshadowing. That constrains the envelope. You could probably do a three-lot townhouse development similar to the neighbour, but the upper floors might be smaller than you would like. Rental yield at face value: 2.6 per cent. That is $685 per week on a $1.5 million property. Painful. You would be heavily negatively geared, bleeding cash every month. Conversion potential: the house has an unusual feature. There is a bar area upstairs that could be converted into a second kitchen. There is also an external staircase providing independent access to the upper level. That combination means you could split the property into two self-contained dwellings, one upstairs and one downstairs, each with its own entrance. Estimated yield after conversion: above 4 per cent. Once interest rates start dropping and rents continue climbing, the cash flow position improves substantially. Development potential: the RGZ zoning supports a one-into-three subdivision similar to the neighbouring townhouse development. However, the setback requirements from the existing development next door would constrain the upper-level floor area. I would budget a feasibility study before counting on this as a guaranteed exit strategy. ## Location anchors: Westfield, schools, and transport The property is a fifteen-minute walk from Westfield Doncaster, which is one of Melbourne's major shopping centres. That proximity supports both rental demand and resale appeal. School zone: Templestowe College. The school is competent but not prestigious. If this property sat inside the Glen Waverley Secondary zone or the Mount Waverley Secondary zone, the price would be $200,000 to $300,000 higher. School zones are the single biggest premiums and discounts in Melbourne's eastern suburbs, and Doncaster draws a partial benefit from being adjacent to premium school catchments without being inside them [4]. Transport: no train station. Doncaster relies on buses and car access. The state government has been promising a Doncaster rail line for decades. If it ever materialises, property values would jump. But I do not invest on the basis of government promises. I invest on what exists today. ## My verdict: conditional buy with conversion as the thesis The land value ratio is outstanding. The RGZ zoning provides development optionality. The floor plan conversion from bar to kitchen with independent staircase access is a legitimate value-creation angle that most buyers will overlook. But the suburb fundamentals have weaknesses. The 47 per cent unit proportion is a structural drag. The 24 per cent ten-year growth underperforms. The affordability ratio at 13 times is stretched. I would buy this property under one condition: you execute the conversion immediately post-settlement and push the yield above 4 per cent. At 2.6 per cent yield, this is a cash drain. At 4-plus per cent yield with rates falling, the numbers start working. The development angle is your medium-term exit. In three to five years, if the Doncaster market continues its trajectory, a three-lot townhouse development on 850 square metres of RGZ-zoned land could deliver a substantial profit. But that is a development play, not a passive investment strategy. Across our 350-plus transaction portfolio, the properties that have delivered the strongest risk-adjusted returns share two characteristics: they were purchased below land value, and they were converted within six months of settlement. This Doncaster property ticks both boxes [5]. The question is whether you have the appetite for a $1.5 million entry point in a suburb with 24 per cent ten-year growth. That is a question only you can answer. ## References 1. [ABS, 'Household Income and Wealth', Cat. No. 6523.0, 2019. Doncaster median household income and affordability calculations.](https://www.abs.gov.au/statistics/economy) 2. [ABS Census 2016. Doncaster dwelling profile: 47% units/apartments, 70% owner-occupier rate.](https://www.abs.gov.au/census) 3. [PremiumRea investment framework. Land value ratio above 100% indicates building is effectively free; purchase is land-only transaction.](#) 4. [REIV, 'Melbourne School Zone Premium Report', 2019. Price premium analysis for properties within premium secondary school catchments.](https://reiv.com.au/property-data) 5. [PremiumRea portfolio data. 350+ transactions. Strongest risk-adjusted returns from properties purchased below land value with conversion within 6 months.](#) 6. [Victorian Planning Authority, 'Residential Growth Zone Schedule', 2019. RGZ development parameters and setback requirements.](https://www.planning.vic.gov.au/) 7. [Domain, 'Rental Report Q2 2020'. Doncaster vacancy rate 2.6%, median rent, days on market.](https://www.domain.com.au/research/rental-report/) 8. [CoreLogic, 'Suburb Performance Report', 2020. Doncaster 10-year median house price growth analysis.](https://www.corelogic.com.au/research) --- Source: https://premiumrea.com.au/blog/doncaster-850sqm-house-investment-analysis Publisher: PremiumRea (Optima Real Estate) — Melbourne buyers agent