Melbourne mum Maria Hatzi is building a granny flat in her backyard for her 18-year-old son Lee to live in while he saves up a home deposit. (Source: Supplied)
Granny flats are expected to start popping up in more and more backyards around Australia as locals governments remove red tape and residents search for solutions to the current housing crisis. While the secondary homes were traditionally built to house elderly relatives (hence their namesake), they are increasingly being used by the younger generations as a stepping stone into the property market.
Maria Hatzi and her husband are about to start construction on a granny flat in the backyard of their Ferntree Gully home in Victoria. The couple plan to let their 18-year-old son Lee and his partner live in the dwelling while they save up for their first home.
Hatzi told Yahoo Finance the couple had been thinking of building a granny flat for some time and when her son floated the idea of moving out of their family home, they decided to take the plunge.
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“I said, ‘Well mate, I don’t feel you’re right to move out. It’s so expensive to rent out there’,” the 47-year-old cleaning business owner said.
“I said [his] Dad and I would be happy to invest in a granny flat and build it in our backyard, if that’s something that you want to live in and save for your future home… because it’s so expensive out there for our kids these days.”
The granny flat will cost the couple around $250,000 and will include two bedrooms, an open plan kitchen and living area, a bathroom and a European laundry.
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Hatzi is building the Lana 60 Luxe granny flat from Innovista Group, which will cost around $250,000. (Source: Innovista Group)
Hatzi said the couple had added the cost to their home’s mortgage, which they had nearly finished repaying.
“At the start, it was a bit, do I, don’t I? Am I taking a big risk because of our age? Do I want to be in debt?” she said.
In the end, Hatzi said the benefits outweighed any doubts and she’s seeing it as an “investment”, both in her home and her kids’ futures.
The couple also have a daughter, aged 14, who can also eventually move into the granny flat once their son has bought his own place.
They then could rent it out in the future, with their builder advising it could be rented out for $500 per week currently.
“I prefer to see my kids happy than them struggling. So we’re happy to do that,” Hatzi said.
“I think this will be the main thing instead of doing a cash gift when they do move out. This is what they can have to build their own little blocks to actually get out and purchase their own home.”
Theodore Stone, CEO of granny flat developer Innovista Group, said Hatzi’s situation was something he was seeing more and more, particularly in more established suburbs.
“What we’re seeing now is this idea of a granny flat being a multi-generational asset,” Stone, who calls himself ‘The Granny Flat King’, told Yahoo Finance.
“It’s now actually helping families find that in-between where their kids get to keep their independence, get to live close but not too close, and at the same time allow them to save up a deposit.”
Stone expects this trend will become even more prevalent moving forward as younger buyers face steeper challenges getting into the property market and parents look to give them a “leg up”.
Innovista’s granny flats range from $180,000 to $250,000 for a two-bedroom, one-bathroom 60 square metre dwelling. They generally take between four and six months to build.
Stone said he was also seeing people build granny flats to house elderly relatives or carers, while about half of his clients are building them as an investment to rent them out after Victoria eased restrictions.
Cotality (formerly CoreLogic) figures found an extra two bedrooms and an extra bathroom could add around 32 per cent to the value of an existing dwelling.
For a house worth $500,000, a granny flat could potentially add $160,000 to the value of the property.
State governments have been removing red tape around granny flats and simplifying approvals in recent years.
New South Wales changed its legislation in 2009 to make it easier to build granny flats. It allows homeowners to build a granny flat up to 60 square metres without getting council approval, provided they meet minimum requirements.
Other states and territories have also followed suit, with Victoria exempting small secondary dwellings up to 60 square metres from requiring a planning permit in most cases in 2023.
“Now you don’t need a planning permit anymore, you can go straight to a building permit, which is a lot more streamlined, quicker and cheaper,” Stone explained of Victoria’s requirements.
“You can rent it out to anybody that you wish. You can generate rental income from it without any restrictions. It doesn’t have to be movable, it can be fixed.”
In Queensland, the government amended rental rules for granny flats in 2022 to allow homeowners to rent them out to anyone outside the family.
A recent survey by the Housing Industry Association found builders were expecting to build 10 times more granny flats in 2026 compared to 2022. They attributed the sudden surge to changes in the planning system.
HIA estimates that 4,320 secondary dwellings were approved for construction in NSW each year between 2017 and 2023. In Victoria, an average of just 270 permits were issued in the same time frame.
Property website Domain has also noticed an uptick in interest in granny flats, with the term the most searched in Sydney so far this year and the second-highest in Perth.
A joint report by Archistar, Blackfort and Cotality in 2023 found there were around 242,000 properties suitable for granny flat development in Sydney, representing 17.6 per cent of the region’s housing stock.
There were almost 230,000 in Melbourne, representing 13.2 per cent of stock, and nearly 185,000 in Brisbane, or 23.3 per cent of stock.
Stone is also expecting granny flats to become a more common sight.
“I think that over the next couple of years, the amount of granny flats that’ll get built in Victoria will at least triple, at least, from where they are currently now,” he said.
“That shift is probably happening as we speak.”
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