More than half a million homeowners in Sydney, Melbourne and Brisbane could boost home values by 30 per cent by building a granny flat, finds a new report from Archistar and CoreLogic.
Combined analysis by CoreLogic and Archistar identified 583,440 properties in Australia’s three biggest cities that meet the criteria for an additional self-contained unit of at least 60 sqm.
According to Tim Lawless, CoreLogic’s head of research, building a granny flat is an “increasingly compelling proposition for homeowners in a relatively lacklustre market”.
“Not only can it help to manufacture new capital gains, but it has the potential to generate rental income while meeting demand for more affordable housing.”
Constructing a two-bedroom granny flat would require an initial investment of around $200,000, while the outlay for a one-bedroom dwelling would be approximately $120,000.
CoreLogic figures show a two-bedroom self-contained apartment could add an additional 27 per cent in rent each week, contributing more than one percentage point to the overall gross yield of the property.
A granny flat typically rents out for less than the price of a standard apartment, making it an attractive and affordable option for renters on a budget.
“Many properties identified as suitable for a granny flat are in densely populated and traditionally expensive areas, such as Sydney’s Northern Beaches or Hornsby,” Lawless adds.
“More granny flats on the rental market will make it easier for young people to stay in their preferred area, rather than move further afield to find value for money.”
Sydney had the greatest potential for granny flat development, with 233,218 properties, or 15.9 per cent, meeting the criteria.
Topping Sydney’s list is Castle Hill, where a granny flat could be built on 4,670 dwellings. Half the properties (50.3%) in Dennison West were deemed eligible for a granny flat. And with a median price of $610,622 and an average land size of 638 sqm, St Clair in Penrith was Sydney’s most affordable suburb in the top 20 granny flat hotspots, while also delivering the highest rental yield of 3.9 per cent.
In Brisbane, 21.6 per cent of all properties in the city could develop a granny flat. With an average land size of 759 sqm, The Gap has the most properties available for development (2,784).
In Melbourne, the greatest percentage of properties suitable are found in the Mornington Peninsula suburb of Merrick’s Beach (47.3 per cent), which has a median property value of $806,779.
Robert Coorey, cofounder of AI-enabled property platform Archistar, says many homeowners are “sitting on a pot of gold”.
While regulation on second residencies does change from state to state, Archistar’s platform helps homeowners to assess thousands of zoning and planning laws and understand the development potential of a particular property.
Capitalising on this untapped potential could deliver far-reaching economic and social benefits, “boosting the construction industry to the tune of $87.5 billion” and accommodating our growing population in popular suburbs, Coorey says.