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Granny flats

By David Gordon

Granny flats a great way to feather or empty your nest

In 2009 the NSW government released a new policy that has been well accepted by most property owners, including investors and owner-occupiers. The Affordable Rental Housing – State Environmental Planning Policy (SEPP) is encouraging people to build more granny flats.

The new policy introduced by the NSW government is a fabulous strategy, as it allows more property owners to add value to their homes or investments in the short and long term. From a development perspective, it can be a quick and easy way to build your property portfolio and create high rental yields. Owners can benefit from cash-flow from the rent on two dwellings and also receive good depreciation benefits on the new flat. This means people can keep moving forward with their investment strategy. Unlike buying a single apartment for instance, which is likely to be negatively geared, adding a granny flat to a property that already has an existing dwelling can result in a cash-flow positive situation.

In the past granny flats were only permitted in certain residential zones, but this SEPP has opened up a whole new real estate door. The aim of the granny flat is to boost the supply of affordable rentals by providing housing for the elderly so families can support each other, as well as the younger generation who are living at home and are not in a position to move out just yet.

Government projections show us that single-person households are likely to be the fastest growing sector over the next 20 years, so demand is definitely there.

Small secondary dwellings are an attractive option for singles and couples who don’t need a lot of room and are the most likely people to be under rental stress. Young people are also staying at home longer, and granny flats can provide extra space for them and be a lifesaver for baby boomers who were hoping to empty their nest some time soon.

This policy means that if you have a block over the size of 450 square metres you are able to build a granny flat no larger than 60 square metres on your existing property; you may get approval in approximately 10 days as long as complies with the council’s regulations. Not only will this add value to your home, but you can rent out the flat and do your bit to assist the chronic rental shortage we are seeing not only on the northern beaches but across NSW.

Property Bloom focuses on developing property, including granny flat developments, in the Hunter Region due to its affordability and strong, diverse economy. The area is earmarked for long term growth in the NSW government’s Lower Hunter Regional Strategy. The 25-year plan, provides for 160 000 new residents and 66 000 new jobs. With the existing mining, retail, construction, tourism, low unemployment rate and low rental vacancy rates, the Hunter Region ticks all the boxes for a strong region to be investing in.

We are finding properties for around $220,000 that may need a small cosmetic renovation of around $5,000. These projects are creating a 9% to 10% gross rental yield. This type of development suits someone starting out in developing or an investor looking to create a cash flow positive investment.

To take advantage of the NSW government’s Affordable Rental Housing – State Environmental Planning Policy (SEPP) the regulations include:

  • Granny flat must be no more than 60 square metres in size
  • Land must be more than 450 square metres
  • Can only be one house and one granny flat on the land
  • The land cannot be subdivided
  • Will need to comply with LEP of your council (contact council re buildingrequirements)
  • It meets the requirements of the Building Code of Australia

For more information go to:

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