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First, let’s define what we mean by a “granny flat”. A granny flat is a self-contained living area located on the same land as a single-family home. It has its own entrance, bathroom, kitchen, living space, and sleeping area, but it is secondary to the main house. In Australia, granny flats are limited to 60 square metres (about 645 square feet), but those 60 “living area” square metres can feel more spacious with a clever design, including decks and patios.
Granny flats get their name from their common use case—housing ageing parents or “grannies.” But today, granny flats serve a variety of purposes beyond a home for grandma. Adult children looking to save money, guests needing an extended stay, or even short-term renters are all potential occupants of modern granny flats.
Looking for a granny flat in Mornington Peninsula, Yarra Valley, or Windsor? Superior Granny Flats specialises in designing and building custom granny flats that complement the unique charm of these areas.
The popularity of granny flats has exploded in Australia in the past decade. According to BMT Tax Depreciation Quantity Surveyors, approvals for granny flats jumped by 24.1 per cent across Australia from 2016-2017 to 2017-2018, with the highest number of applications in NSW and Queensland.
Several factors have fueled this growth:
With this rising popularity, it’s no surprise that many homeowners are starting to think building a granny flat is a smart financial move. Let’s weigh the potential benefits and drawbacks.
Searching for a granny flat in Hervey Bay, Ipswich, Jimboomba? Our team understands the specific council requirements and lifestyle needs in each area. We’ll guide you through options that maximise your property’s potential while respecting neighbourhood character
One of the primary benefits of having a granny flat is the potential for rental income. Whether you rent it out to a long-term tenant or list it on short-term rental sites like Airbnb, a granny flat can provide a steady stream of additional income to offset mortgage costs or boost your overall income. On average, granny flats can rent for $200 to $400 per week, though prices may be higher or lower depending on your location, size, and amenities offered.
According to CoreLogic data, dwellings with a granny flat in Australia are advertised with 27% higher weekly rents than those without a granny flat. With the extra rental income, a granny flat could pay for itself within 5-8 years, provide an estimated yield of 15%, and boost overall property value by 30% or more.
In addition to rental income, a granny flat may increase your overall property value. A well-designed, high-quality granny flat is likely to be seen as a valuable addition by future home buyers, especially in areas where housing affordability is a concern or there is high demand for rentals.
CoreLogic data shows that house listings with a granny flat had 2.7% higher estimated prices compared to those without. The combined rental and resale value may provide a compelling return on investment for your granny flat. Of course, it’s important to note that any potential added resale value depends on the quality of the build, the features of the granny flat, and buyer demand in your local area.
Superior Granny Flats builds custom granny flats, sleepouts, and relocatable homes across Victoria.
Beyond financial benefits, a granny flat offers incredible flexibility for your household’s changing needs over time. You could use the granny flat to:
As your family evolves, a granny flat adapts to how you need to use the space. This flexibility allows you to maximise the utility of your property while avoiding the expenses of upsizing your home or relocating.
For more inspiration on maximising the potential of your granny flat, check out our article on Design Ideas to Maximise the Size of a 60m2 Granny Flat in Victoria!
For many families, buying a larger home to accommodate parents, adult children, or long-term guests may be cost-prohibitive. Building a granny flat is often a much more affordable way to gain extra living space than moving to a bigger house. The average cost to build a granny flat is $120,000, which is roughly 25% of the median house price in Australia.
Granny flats can also provide an affordable housing alternative for adult children struggling to break into the property market on their own. By charging minimal or no rent, you can help the next generation save money until they can afford their own place. Likewise, a granny flat allows senior relatives to downsize and remain close to family while living independently.
While we’ve covered many aspects of granny flats as an investment, there’s always more to learn. For a deeper dive into this topic, you might be interested in our comprehensive guide, ‘Maximising Property Investment with Granny Flats.’
While the benefits are substantial, there are also potential drawbacks to carefully consider before jumping on the granny flat trend.
The biggest deterrent for many homeowners is the significant upfront cost of building a granny flat. Prices range on average from $100,000 to $150,000, depending on the size, materials, fittings, site works required, and optional extras. Building a high-quality, adaptable granny flat that will attract reliable tenants and boost your property value usually means investing more upfront.
You may need to use your savings, refinance your mortgage, take out a construction loan or use the equity in your home to fund the project. Consider your current financial situation and how long it will take you to pay off the initial investment with rental income. Talk to a financial advisor to see if a granny flat makes sense for your household budget and lifestyle.
While many states have eased restrictions on building granny flats, homeowners still need to navigate a range of council regulations and approval processes that vary based on location. There are requirements for minimum land size, maximum granny flat size, setbacks from boundaries, parking provisions and more.
Some states charge high development application fees or infrastructure contributions. For example, NSW eased many barriers but raised the minimum lot size to 450 square metres and required a $5,000 development application fee. In some Sydney areas, the local council also charges a Section 7.11 contribution fee which is a percentage of the total building cost, often $8,000 or more.
It’s important to check your local council’s specific requirements, zoning restrictions, costs and approval process thoroughly before starting a granny flat project to avoid headaches and unexpected fees. Working with a reputable granny flat builder can help you navigate this process.
FURTHER READING: Understanding Victoria’s Granny Flat Rules: A Comprehensive Summary
By constructing a secondary dwelling, you will inevitably reduce the amount of yard or garden space on your lot. This could diminish the appeal of your property to some future buyers who prefer substantial outdoor space or have limited use for a granny flat.
If your granny flat will take up a good portion of your usable outdoor space, consider how this will impact your household’s lifestyle and enjoyment of the property. Careful placement and design of the granny flat can help maximise your remaining yard area. Including some outdoor space like a deck or courtyard with the flat itself can also compensate for the backyard space lost.
If you are relying on rental income to make the granny flat worthwhile, vacancies are another concern to keep in mind. There may be times in between tenants where the flat sits empty and doesn’t generate cash flow to offset your mortgage or building costs. Short-term rental demand could also dip in the off-season, depending on your location. Some homeowners may not want the hassle of finding tenants and dealing with turnover.
Of course, if you are building the granny flat for family members or your own use, this is less of an issue. You could also get creative and find a long-term tenant, such as an exchange student or daytime tenant, using the space as a home office. Building a highly desirable, well-appointed granny flat in an in-demand area will help minimise vacancies.
Superior Granny Flats builds custom granny flats, sleepouts, and relocatable homes across Victoria.
As you can see, there are compelling reasons granny flats can be a great investment—from boosting property value and generating extra income to providing flexible living arrangements for the households of today. However, the substantial costs and potential drawbacks mean granny flats are not the right choice for every homeowner or every property.
To determine if a granny flat is a smart investment for your situation, consider:
Carefully evaluating these factors will help you decide if investing in a granny flat is likely to pay off for your property and meet your family’s needs.
PS: If you’re wondering about current costs and what factors influence them, our recent article, ‘How Much Does It Cost to Build a Granny Flat in 2024?’ provides an up-to-date analysis of pricing trends and considerations.
If you’ve weighed the considerations and decided a granny flat is the right investment for your property, Superior Granny Flats is here to make the process smooth and simple. We are a premier builder of high-quality granny flats across Australia with over 20 years of combined building experience.
We understand that planning your granny flat is a big decision. That’s why we work closely with you from start to finish to design and build a granny flat that maximises your space, meets your needs and matches your existing home. From securing permits to personalised styling, we handle all the details while keeping you informed.
Ready to unlock the potential of your property with a granny flat? Contact us today to request your free site inspection and quote.
