Impact of Granny Flats on Property Valuation in Victoria

Granny flats are no longer just small backyard homes for ageing parents. In Victoria, they’ve become an attractive property feature for investors, families, and homeowners alike. But here’s the question that often comes up: what impact do granny flats actually have on property valuation?

It’s a fair concern. Building a secondary dwelling is no small investment, and before you commit, you want to know if it will pay off in the long run.

This blog unpacks the details – from how granny flats affect property values, to what banks and buyers think, to the specific rules in Victoria you need to keep in mind.

Why Granny Flats Are Gaining Popularity in Victoria

Before getting into valuation, it’s worth understanding why granny flats are booming in the first place.

• Housing affordability: With Melbourne’s median house price sitting well above $900,000 in 2025, buying separate homes for family members is out of reach for many. A granny flat provides a cost-effective alternative.
  
• Multi-generational living: More Victorians are embracing multi-generational households, with adult children staying longer or elderly parents moving in to be closer to family support.
  
• Rental opportunities: In areas where leasing is permitted, granny flats can generate steady rental income, making them appealing to investors.
  
• Flexible use: Beyond housing family, granny flats can serve as home offices, guest accommodation, or even short-term rental spaces.

So, granny flats clearly tick a lot of lifestyle and financial boxes. But how do they stack up when it comes to property valuation?

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.

Do Granny Flats Increase Property Value?

The short answer: yes, they usually do – but it depends.

Adding a granny flat often raises property value because it increases functionality, versatility, and appeal to a wider pool of buyers. However, the exact uplift depends on factors such as:

• The quality of the build (cheap prefabricated units may not add much)
  
• Compliance with Victorian planning and building regulations
  
• The suburb and local demand for multi-dwelling properties
  
• Whether the flat can legally be rented out

On average, well-designed and compliant granny flats in Victoria can add anywhere from 20–30% to property value. For example, if your home is valued at $800,000, the addition of a quality granny flat could push that figure closer to $960,000 or more.

But valuation isn’t always a straightforward calculation. Let’s break down what valuers, lenders, and buyers consider.

How Property Valuers Look at Granny Flats

Property valuers are meticulous, and their assessment goes beyond just counting the number of bedrooms. When a granny flat is added, they often look at:

1. Quality of construction: Is it built to the same standard as the main dwelling? Does it comply with building codes?
   
2. Design integration: Does the flat complement the property, or does it look like a poorly placed shed?
   
3. Market demand: Are buyers in that suburb actively seeking properties with secondary dwellings?
   
4. Utility: Is it self-contained with a kitchen, bathroom, and separate entrance?

Valuers are cautious. They may not always add the full cost of construction to the valuation figure. For instance, if you spend $150,000 on a granny flat, the property’s value may not automatically increase by $150,000. Instead, they’ll weigh up buyer demand and local market conditions.

The Buyer’s Perspective

Ultimately, the real test of value is in the buyer’s eyes. Here’s how granny flats influence buyer appeal:

• Families love them – they can house teenagers, uni students, or grandparents without needing to buy another property.
  
• Investors see rental income – in areas where rentals are allowed, buyers factor in the potential returns.
  
• Future-proofing – many buyers like the idea of a granny flat as a flexible space that can adapt to life’s changes.

Of course, there’s also the flip side: some buyers may see a granny flat as extra maintenance or a space they don’t need. This is why the flat’s design and integration with the main property are so important. A poorly built or non-compliant unit could actually deter buyers.

The Bank and Lending Angle

If you’re thinking about refinancing or applying for a loan, you may wonder how banks view granny flats. Generally, lenders are conservative.

• Approved, council-compliant granny flats are looked at more favorably.
  
• Unapproved or non-compliant structures can actually drag down valuation and make financing difficult.
  
• Rental income considerations: In Victoria, strict planning rules mean granny flats (or “dependent person’s units”) can’t always be leased out separately. This affects how banks calculate the income potential of the property.

The bottom line: always make sure your granny flat ticks the legal boxes.

Rules and Regulations in Victoria

Victoria’s laws are stricter compared to other states like NSW. Understanding them is crucial before building.

• Granny flats in Victoria are legally called Dependent Person’s Units (DPUs).
  
• They can only be occupied by a person dependent on the main household – typically an elderly parent or a family member with special needs.
  
• Once the dependent person moves out, the unit may need to be removed unless it can be repurposed for non-habitable use (like a studio or storage).
  
• You’ll need a building permit from your local council, and in some cases, a planning permit.

This framework affects valuation because it limits the granny flat’s long-term income potential. For example, if a buyer can’t rent it out separately, they may view it as less of an “investment property” and more of a lifestyle addition.

How Location in Victoria Shapes Valuation

The impact of a granny flat on property value isn’t uniform across the state.

• In metropolitan Melbourne, where land is scarce and house prices are high, a granny flat often adds significant value – especially in family-friendly suburbs.
  
• In regional areas, granny flats may still add value, but the uplift might be smaller due to lower overall demand for dual living.
  
• High-demand school zones and areas with strong multi-generational living trends tend to see the biggest boosts in property value from granny flats.

If you’re looking for options when it comes to a builder, Superior Granny Flats is the way to go. We proudly serve many areas with top-quality top-quality granny flats in Dandenong, Windsor, Hoppers Crossing, and Laverton.

Common Concerns Homeowners Have

If you’re weighing up building a granny flat, you might have some of these questions:

1. Will I overcapitalise?
   It’s possible if you spend more on the build than the local market can support. Always research property values in your suburb before committing.
2. What if I don’t have a “dependent person”?
   You can still build, but you’ll need to be mindful of the regulations. If no dependent person is living there, you may have to repurpose the flat.
3. Will it make my property harder to sell?
   In most cases, no. A well-built, attractive granny flat increases appeal. But poor design or non-compliance can hurt resale value.
4. Do I need council approval?
   Yes. Skipping this step risks penalties, reduced valuation, and major headaches when selling.

Practical Tips for Maximising Value

If your goal is to boost your property’s worth, here are some smart moves:

• Invest in quality finishes and match the style of the main dwelling.
  
• Ensure the granny flat has privacy – separate access, landscaping, and soundproofing.
  
• Work with an experienced builder who understands Victorian regulations.
  
• Avoid cutting corners; non-compliant builds often cost more in the long run.

The Future of Granny Flats in Victoria

There’s growing discussion about whether Victoria should follow NSW and relax its granny flat laws. If regulations shift to allow broader rental use, the value impact could increase dramatically. Investors, in particular, are watching this space closely.

For now, granny flats remain a strong lifestyle-driven feature in Victoria, with clear potential to boost property value – provided they’re done right.

Build Your Dream Granny Flats with Superior Granny Flats

Granny flats can be a powerful way to add value to your property in Victoria, but the impact isn’t automatic. It depends on the quality of construction, compliance with local regulations, and the demand in your area. For many homeowners, they not only increase property valuation but also improve everyday living with more flexibility and space.

If you’re considering building a granny flat, it’s worth seeking expert advice from builders who understand both the construction process and Victorian laws.

At Superior Granny Flats, we specialise in designing and building high-quality, fully compliant granny flats across Victoria. Whether you want to create space for family, boost your property’s value, or future-proof your home, our team is here to guide you every step of the way.

Get in touch with us today to discuss your plans and explore how a granny flat can transform your property.