Could granny flats free up the rental market?

Building a self-contained unit, also called an ancillary dwelling, on an appropriate residential lot adds housing to land that’s already fit for purpose. And putting this choice in the hands of the property owner eliminates the local pushback – as long as it meets council approval, a residential home owner is free to do with their property as they like.

Recent analysis from CoreLogic, in conjunction with planning research platform Archistar and real estate construction lender Blackfort, has captured the full picture of the untapped potential for properties to host new ancillary dwellings across Sydney, Melbourne and Brisbane.

Sydney is home to the most granny flat development opportunities, with the firms identifying around 242,000 properties that would be suitable to accommodate a new two-bedroom self-contained dwelling. That’s about 17 per cent of the NSW capital’s housing stock.

Brisbane has almost 185,000 suitable sites, representing 23.3 per cent of houses across its metro region.

Melbourne, meanwhile, has almost 230,000 potential sites, or 13.2 per cent of its of stock, but it should be noted that Victorian law prohibits the renting of ancillary dwellings to anyone other than a dependent of the primary resident, and it can only be inhabited by one person. Even so, an increase in the number of granny flats in the Victorian capital could have the potential to add some flexibility to the rental market.

Of the sites the firms identified across the three cities, more than a third were within 2 kilometres of a train or light rail station, making them highly desirable locations. Furthermore, 17 per cent have a hospital within the suburb boundary, which could place them well for serving essential workers in the health care sector.

CoreLogic’s research director Tim Lawless said that with forecasts indicating the national housing market will face an undersupply of over 100,000 dwellings over the next five years, solutions like granny flat construction should be tapped as one element to fill the gap.

“For policymakers and government, granny flats present an immediate and cost-effective opportunity to deliver much-needed housing supply within existing town planning guidelines,” he said.

“For home owners, the addition of a second self-contained dwelling provides an opportunity to provide rental housing or additional accommodation for family members, while at the same time, increasing the value of their property and potentially attaining additional rental income,” Mr Lawless added.

CoreLogic estimated that an extra two bedrooms and an additional bathroom adds roughly 32 per cent to the value of an existing dwelling. For a house worth $500,000, the addition of a granny flat has the potential to add approximately $160,000 to the value of the property.

Archistar co-founder Dr Benjamin Coorey said that it is critical to find solutions for accommodating more housing in the cities facing increasing shortages.

“Since granny flat developments leverage existing lot areas and require no changes to town planning regulation, they offer an immediate opportunity to address housing shortages and affordability pressures expected in the coming five years for both buyers and renters,” he said.

“Granny flats present a cost-effective opportunity to boost housing supply for growing capital populations close to existing infrastructure such as railways, bus routes and major road networks for state and local governments,” Dr Coorey added.

Top Sydney suburbs with granny flat development potential

Baulkham Hills (4,673 dwellings / 43.3 per cent of housing stock)

Castle Hill (4,423 dwellings/ 39.8 per cent of housing stock)

Cherrybrook (3,421 dwellings / 61.8 per cent of housing stock)

Carlingford (2,910 dwellings / 46 per cent of housing stock)

West Pennant Hills (2,698 dwellings / 49.3 per cent of housing stock)

Top Melbourne suburbs with granny flat development potential

Glen Waverley (4,009 dwellings / 27.4 per cent of housing stock)

Rowville (3,674 dwellings / 30.3 per cent of housing stock)

Berwick (3,604 dwellings / 18.3 per cent of housing stock)

Rye (3,705 dwellings / 38.6 per cent of housing stock)

Doncaster East (3,397 dwellings / 34.9 per cent of housing stock)

Top Brisbane suburbs with granny flat development potential

The Gap (2,986 dwellings / 48.8 per cent of housing stock)

Alexandra Hills (2,789 dwellings / 46 per cent of housing stock)

Redbank Plains (2,479 dwellings / 30.3 per cent of housing stock)

Albany Creek (2,378 dwellings / 44 per cent of housing stock)

Rochedale South (2,215 dwellings / 42.3 per cent of housing stock)

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