If you’re hoping to add value to your property, a granny flat could be the answer. And in our biggest state capitals, almost 600,000 properties have what it takes to house a granny flat.
Across Australia a quiet revolution is taking place: The humble granny flat is becoming trendy.
In 2018 alone, over 10,000 new granny flats were constructed across Australia’s suburbs. And it seems nobody loves granny quite as much as NSW, where 6,065 granny flats popped up during the year.
Given that there’s nothing new about granny flats, why are they suddenly more popular than Grandma’s apple pie?
The answer, according to research by CoreLogic and Archistar, is the extra space granny flats provide, and their potential to be a money-spinner.
Certainly, granny flats have a multitude of uses: A storage area, a backyard gym or home office. Or they can provide accommodation for adult kids while they save for a first home.
But what’s really exciting is the potential for a granny flat to put extra cash in your pocket.
A 30% uptick in value
CoreLogic and Archistar found that when a granny flat is used as a short terms rental through sites like AirBnB and even a longer-term rental, it can pull in an extra few hundred dollars a week of income, if not more.
Adding a 2-bedroom granny flat to an existing rental property, can generate a 27% uptick in weekly rent, adding an extra 1% to the property’s overall gross (before costs) yield.
The numbers look good from a market value angle too. CoreLogic estimates a granny flat can lift a home’s value by around 30%.
Space to jump on the granny wagon
When it comes to adding a granny flat to your backyard, there can be limitations. The rules about whether you can build a ‘secondary dwelling’ vary from state to state – and even between councils. However, a key factor is the size of your block. In NSW for instance, you’ll need a minimum lot size of 450 square metres.
The good news is that across our three biggest state capitals – Sydney, Melbourne and Brisbane, almost 600,000 properties have scope for a granny flat.
In Sydney alone, CoreLogic and Archistar identified 233,218 properties suitable for a granny flat – that’s 16% of all properties across the metro region.
The Central Coast tops the list, with 24,540 properties ticking the granny flat boxes. That’s followed by Blacktown (18,617), the Hills Shire (15,765), and the Northern Beaches (15,617). Hornsby on the north shore, rounds out the top five, with 14,782 properties all looking good for a granny flat development.
In Brisbane, 204,598 properties across the metro area are suitable for a granny flat. Heading the list of granny-flat-friendly locations is The Gap, with 2,784 suitable properties. That’s followed by the Moreton Bay region, where Albany Creek, Morayfield and Deception Bay each have over 2,000 properties each ideally suited for a granny flat.
In Melbourne, just over 145,000 properties have what it takes to build a granny flat, and most are located in the city’s east and south east. The top three good-for-a-granny-flat suburbs are Mount Eliza (2,584 possible properties), Eltham (2,489) and Mount Martha (2,354).
Managing the cost
Even if your property has the space for a granny flat, there’s always the matter of cost. On this score, there’s a wide variety of price points.
At the lower end of the price spectrum, a flat pack 60 square metre kit, offering two bedrooms, can come with a price tag of about $50,000. This doesn’t include the cost of labour to put it all together or to have services like electricity and plumbing connected.
For a professionally built granny flat, you’re probably looking at closer to $150,000. But the final price can go higher depending on the fit-out and the nature of the block.
Financing a granny flat
The next question is how to pay for it all.
Several different options are available here. One strategy is to tap into home equity either through a loan top up or by refinancing your current home loan. Alternatively, a separate construction loan could be the answer.
The key is to talk to your local Aussie Broker who can explain the options available in your situation. With an idea of how to finance a granny flat, you’re in a better position to decide if it’s time for you to jump on the granny-bandwagon.
You may also be interested in Why granny flats are so hot right now, Australia’s top performing suburbs for long term price growth and Renovations that add the most value.