Read and Enjoy…
14 January, 2017
No longer regarded as just a quick, budget solution to housing your ageing relatives, Granny Flat-living is having a bit of a renaissance.
State governments are becoming more open to the building and use of Granny Flats — the New South Wales government overhauled its regulation regarding Granny Flats in 2009, as an example — and the designs are becoming smarter, more modern and more liveable too. So much so, that Granny Flats perhaps shouldn’t even be labelled “granny” anymore.
According to data from Flatmates.com.au, Granny Flat listings as private rentals on the site increased by 16 per cent in 2016, nationally, while searches for Granny Flat accommodation increased by 84 per cent in the last quarter alone. In Perth, the number of Granny Flats listed on the site rose a whopping 56 per cent in 2016.
More and more renters are opting for Granny Flats over share housing and savvy homeowners can capitalise on this.
THE ANSWER TO HOUSING AFFORDABILITY?
Thomas Clement, the CEO of Flatmates.com.au, said the resurgence of the Granny Flat is “absolutely” driven by rising real estate prices and affordability pressures. And both sides of the equation — owners and renters — are looking for ways to reap benefits in a heated market.
“There are a lot of people in their 20s and 30s that struggle to afford accommodation, particularly in the main city centres,” Mr Clements told news.com.au.
“It is also driven by the fact that there is so much money in property in Australia and people are looking at their property and asking how they can utilise that asset better and make more money out of it ... It is a great way of supplementing their income.”
The national average weekly rent a homeowner can receive from privately renting out a Granny Flat is $283, according to data crunched by Flatmates.com.au. But in Sydney, homeowners are receiving an average of $346, equating to an average of $17,992 in rental income a year.
In Perth, where Granny Flat listings rose the most in 2016, homeowners are receiving an average of $257 a week, equating to $13,364 per annum.
By comparison, the national average weekly rent for a private room in a share house on Flatmates.com.au was $220 per week in 2016.
Granny Flat Finder, an online service which compares Granny Flat designs and builders for consumers, has had an increase in inquiries every year since the company started in 2010.
“It has literally been month-on-month growth in inquiries,” Harry Laos, Senior Project Manager of Granny Flat Finder told news.com.au.
“But the demand for Granny Flats really started taking off around 2011 because it became a good idea in investment property circles.”
Pretty soon after that, Mr Laos explained, everyday homeowners were clueing in and really beginning to add fuel to the resurgence.
“More and more we are seeing your everyday mum and dad couples reaching their retirement years, and even younger couples, wanting to divide their backyard with a partition or hedge, build a Granny Flat, and rent it out to pay off their mortgage sooner.”
The average cost to build a Granny Flat, according to Mr Laos, will set a homeowner back somewhere in the vicinity of $1,600 to $2,000 per square metre, depending on the size. For a two-bedroom, 60sqm granny flat — the most popular for homeowners inquiring with Granny Flat Finder — will cost around $105,000 to $125,000 in total to build.
A 2015 analysis by BMT Tax Depreciation suggested the average cost of a Granny Flat to be $121,000 to construct. The tax firm, which collected data from thousands of its depreciation schedules, also suggested that property owners are typically able to achieve annual rental yields of 15 per cent on this investment.
The regulations regarding the construction of Granny Flats and who can live in them varies from state to state, but a change is in the air.
Traditionally, as the name suggests, a Granny flat was for the sole purpose of housing family, with regulations restricting the construction and private rentals of these backyard properties. And in some states, such as Victoria, this is still the case. But for others, such as New South Wales, the government has adapted.
In 2009, as a part of the New South Wales government’s diverse and affordable housing agenda, it overhauled its regulation governing Granny Flats, making them much easier and faster to build. As a part of the Affordable Rental Housing State Environmental Planning Policy 2009, otherwise known as the ‘SEPP’, a Granny Flat can be built in all residential zones and can be approved as a complying development in just 10 days, subject to minimum requirements.
These requirements state that the lot size must be at least 450sqm, the Granny Flat must have a floor space no larger than 60sqm, the lot cannot be subdivided and there is only one house and one Granny Flat on the lot.
Western Australian, the Northern Territory, Tasmania and the ACT have similar regulations. All allow property owners to easily build a secondary dwelling and then rent it to those other than family members.
Victoria, on the other hand, has some of the toughest regulations surrounding Granny Flats in the nation.
It varies from council to council but typically those wanting to build an extra home in their garden have to prove that the future occupant is a dependent person, such as a teenager or disabled elderly parent. The Granny Flat must also be removed if the person dies or moves out.
But now, a change.org petition by Small Change Design and Construction calling on the Victorian government to introduce laws similar to NSW has received more than 2,000 signatures. And according to an article published by The Age in January last year, the Victorian government has pledged to review the rules.
The Age quotes Acting Planning Minister Lisa Neville saying the government was “making sure planning rules keep pace with people’s needs.”
Queensland and South Australia have similarly restrictive regulations.
WHAT ARE THE RISKS?
Building an investment property in your own backyard certainly has potential to be a gold mine, however, it isn’t without its risks. The biggest risk being how it could affect the value of your property.
While it very well could be a drawcard for some buyers and aid its value, it could also do the opposite. Adding an extra property on the land which cannot be on a separate ownership title and therefore cannot be sold separately, could decrease the pool of interested buyers and decrease its overall value.
In addition, homeowners should be wary of its impact on privacy. As you cannot subdivide the lot to build a Granny Flat, you are ultimately sharing your space with others.
“You have to ask if the financial incentive of having that extra income stream is worth the personal choice of sacrificing some privacy, potentially, in your backyard,” Mr Laos said.
“Some backyards are made for Granny Flats and work very well — they separate very nicely between the main house — but others simply don’t, so you can really be sharing a lot of space with other tenants.”
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