Does a Granny Flat add value to your property in Australia?

A secondary dwelling, often referred to as a granny flat, is a self-contained living space situated on a property that also contains a primary dwelling. It usually includes amenities such as a small living space, kitchen, bathroom, and bedroom. Granny flats have increased in popularity for numerous reasons, including their versatility and their potential to earn rental income, thus becoming a smart investment for investors or existing homeowners. Secondary dwellings can be easily adapted for a range of uses, including a home office, guest accommodation, or simply bedroom accommodation for a young adult or grandparent who may desire some additional privacy.

When the cost and disruption of extending or altering the primary dwelling are of concern to residents, a secondary dwelling may provide an alternative option for residents. Granny flats may offer a cheaper option to build and maintain than an extension of the primary home, which may make it the perfect solution for residents wanting to extend their living space on a budget.

The Popularity of Granny Flats in Australia

In Australia, there has been a growing interest in granny flats over the past few years, fueled by factors such as rising property prices, housing shortages, and the prevalence of multi-generational families. As a response to these circumstances, more homeowners are considering granny flats as a means of alleviating these issues. The increased acceptance of multi-generational living has also contributed to this trend, as families are looking to live within proximity but wish to keep some independence. Another aspect of granny flats that supports their popularity is the flexibility they can provide in living arrangements. With the increasing economic pressures of contemporary life, many people are finding that living in an extended family, sharing costs and responsibility with others, is becoming more practical. Granny annexes achieve this aim. They can be within perfect proximity without impinging on privacy, to help build relationships and provide a support structure when required.

How Granny Annexes Add Value to Property

Increased Property Value

Increased property value is one of the main advantages of adding a granny annexe. According to estate agents, property investors, and business valuers, a functional granny annexe, retaining its value, and well-designed, can increase your property value by approximately 20% to 30%. Because of this, more living area and potential rental income mean that a granny annexe is more appealing to buyers. A granny annexe can garner buyers’ interest and even adjust their purchasing price because buyers tend to pay more for properties that add flexibility and rental income to the overall property. Competing in a competitive real estate market, having a granny flat on the property can differentiate your property from others. Financially, as the housing market becomes increasingly competitive and inaccessible, property buyers and renters turn to alternative solutions for adaptable living spaces. Having additional living space on a property can strengthen your negotiation skills and facilitate selling with less time on the market.

Rental Income Potential

Granny flats can also provide a worthwhile stream of rental income. Depending on your area and the quality of the granny flat, you may rent this out for a decent amount of money. This income can be used to help reduce mortgage payments or work towards other financial goals. In high-demand rental areas, this additional income can at times pay for a large portion of the property’s mortgage, which can ultimately reduce the homeowner’s financial responsibility for the property.

Granny annexes also allow homeowners to take advantage of short-term rentals (Airbnb, etc.). In locations that have a large, thriving tourism industry, the ability to host short-term rentals can be especially beneficial, as it can drive higher rent due to dynamic pricing compared to longer-term rentals. This can be especially beneficial in tourism locations, where short lets can often generate much higher rent than longer lets. Homeowners do not have to commit to one strategy for their rental property; they can easily pivot their strategy depending on the season and demand.

Accommodation to Multi-Generational Families

Multi-generational living has seen an increase in popularity in Australia, which in turn has spurred the popularity of granny annexes. Due to their ability to provide a practical solution for families looking to accommodate adult children, siblings or ageing parents. This additional flexibility could make your property attractive to a greater pool of buyers, also adding value. With society more open to different family arrangements, properties that meet these needs are always likely to be sought after.

Furthermore, granny annexes can work well for people looking after a loved one who needs assistance or care, while being able to provide care and maintain independence. This arrangement can strengthen family connections and improve the individual’s quality of life, which also makes properties with granny annexes appealing to homebuyers looking to live together autonomously.

Factors to Consider Before Building a Granny Annexe

Local Regulations and Restrictions

It is important to operate within the confines to protect yourself from legal complications and to create the most value from your investment. Therefore, it is helpful to contact your local council and/or planning authority to ensure you have an accurate understanding of what regulations apply to your property.

The local regulations can be confusing, and it can often provide peace of mind to get the insight of a planner or planning consultant to ensure you have followed the most efficient and compliant pathway to add an annexe to your property, and save you time and money. Being aware of local regulations can also help you identify any grants or government incentives that might be available to assist with some of the costs of construction.

Construction Costs

The price of adding an annexe will vary considerably depending on the size of the build, how you envisage it looking, and the materials being used. In general, you are likely to spend between $120,000 and $220,000, depending on whether you’re after a smaller or larger scale granny flat.

Remember to account for these costs, and carefully consider the potential return on investment when deciding to develop. Also, remember that other costs might emerge during the build, so you must also have a contingency plan.

A variety of financing options are available, such as construction or home equity loans. Determining which of these options is both manageable and allows you to effectively achieve your long-term goals. Investigating the requirements of different loan options will help you conclude which option is the best fit for your situation. 

Design and Quality

The way your granny annexe is designed and constructed will greatly determine both its value and rental value. Whether you’re building a granny flat for your own functional needs or looking to optimise it to be of interest for tenants and enhance the value of your overall property. The layout and level of customisation of your finishes will determine the overall cost of your investment.

Consider appointing the services of an architect or builder who is experienced and has a reputable standing, to ensure a high standard for your granny annexe. A carefully designed granny annexe could improve how comfortable it is to live in, as well as its functionality and aesthetic appeal.

Design the granny annexe and put in as much thought as to what would attract tenants or buyers; for example, energy saving and management systems, up-to-date appliances and modern layouts. If you invest in finishes and fixtures of a higher quality now, it could pay dividends with long-term durability and maintenance, which could all improve the value of your investment.

Are Granny Annexes a Good Investment?

Granny annexes can be a good investment for many homeowners. They provide an increased value to your home, money could be desirable as an income stream, and can even allow family members to live with you comfortably. This is a significant benefit, but before making the investment decision to build one, it is essential to weigh the costs versus the advantages. If you are aware of your own financial goals concerning granny annexes and the current market conditions in your area, you will know whether this is the correct investment for you.

Property Investment Tips

• Research the local marketplace: Knowing the level of demand for granny annexes in your local area should help you determine the highest level of potential rental income you can earn and how much your property could potentially increase in value. Local markets will also help determine if a granny annexe will help you achieve your own investment objectives.
• Talk to the professionals: Speaking to estate agents and property valuers will likely help inform your decision-making process. Property industry professionals have the benefit of experiencing the property market daily and can ensure you’re aware of and obtain the highest level of return on investment.
• Think of the future: Consider how a granny annexe might fit into your short and long-term property investment strategies and is positioned alongside your overall objectives and investment strategy. Keeping in mind these goals through the process will set your overall property investment portfolio up for success. 

Invest in a Granny Flat with Premier Homes 

Call us today and add a granny annexe to your home with Premier Homes. With a large selection of turn-key “ready to move in” homes to choose from, that can be fitted out with basic or custom finishes. Whether you’re after a 1-bedroom or a 3-bedroom. With the ultimate convenient process using a demountable construction process whilst building on site. Our experts are equipped to fit out a granny flat on the toughest properties, whether there’s limited access or sloping landscapes.

Our experienced town planning specialists are here to help you choose the right granny flat to increase the value and functionality of your home and provide an income, or both. As well as being aware of and weighing up council approvals, the costs to build, and the quality of design.

Granny annexes are a multi-dimensional investment opportunity in the Australian property market. Here at Premier Homes, we are committed to helping our customers make the most informed decisions and ease the convenience of the entire process.