Do Granny Flats Add Value To Property?

Whether considering to build an additional structure to your existing property, or maybe looking to buy a home with an existing one, granny flats were once the cultural norm for new home builders. But in today’s market, can they really add value to a property? Having lived in one and picked the brains of real estate agents and builders alike, I have some interesting answers. Let’s go out the back and have a look…

Do granny flats really add value? Yes, they can. But not always. It is largely dependent on the area they are built in. Additionally, all associated costs versus demand for dwellings with granny flats within a specific market area.

Financially, if you want to increase the final value price of your property, it would depend on the expense and cost of the granny flat, versus the return on that expense from the valuation of your property. On the other hand though, when you consider extra space, there’s less garden to maintain, your own private sanctuary, plus the ability to sub-let or even make money from the granny flat by renting it out on weekends and holidays. So, when we look at it that way, the answer is a definite yes!

Anyone who has experienced buying a home, or building one will tell you; there’s always more expense and unforeseen ‘stuff’ than actual glory, most of the time. I’m yet to meet anyone who didn’t encounter at least one challenge when building or buying anything as big as a house, or even a granny flat. Those pictures of handsome young couples with arms around each other, sipping hot chocolate admiring their latest creation… Well, they don’t usually include the headaches from building, planning, or unforeseen weather patterns that wash out their building site or contend with worrying about interest rates. These facts are usually just the tip of the building iceberg. But it really can be worth considering, and it will definitely add value too. The value might be financial, or practical, depending on your own situation.

How it will add value to your property is also dependent on several factors, including:

  • The type/purpose of the granny flat you might build. This could also be a why? A question you might like to consider when thinking about building one.
  • The area/council zone you live in. Are there already lots of granny flats in your area?
  • Your budget vs. return/value added to the property. Is there a demand for them if you were to sell or have your property re-valued?
  • Can you monetize the dwelling once it’s finished?

We’ll be covering all of these and more as we go. So let’s get started!

How A Granny Flat Can Add Value

A granny flat, within NSW building development guidelines as of 2010, is a self-contained, small house with a living area up to 60 m², usually situated in the rear yard of an existing property. Each council zone within Australia will have its own requirements, more on that soon. But the first question to ask yourself (after deciding for what purpose the granny flat will serve) is, will (up to) an extra 60 m² of separate living space add value to my property?

The urban sprawl is shrinking. No bones about that. Gone are the days of the ¼ acre block. Pool and trampoline for the kids. High rise living is great for those who want to live and work in the city, but for those of us who just can’t let go of the idea of tree-lined streets and backyards, we can add on to existing space within a property while still increasing its value too —if we do it right.

Yes, you can benefit from extra m², and you do have the room to live in an area that will support the idea. So, what next?

According to our property valuers and real estate agents, to truly add value to your property as well as be a functional investment, a granny flat must meet the following specific criteria:

  • Maximise value through quality materials and fit-out. Using new and high quality/visually appealing materials with a professional finish. But remember, spending $100K doesn’t automatically boost your entire property value by the same.
  • Don’t pay top dollar for a fibro kit put together by a team of sharks. Take the extra time and planning to build something you know will add value.
  • As above, if the cost per m² is more than a conventional dwelling, then re-think the plan or consider alternative options (see below for other types of granny flat).
  • Build only in an area where there is a demand for dwellings with granny flats, unless you can benefit from the practical addition of one in the longer term to offset the expense.
  • Be unique. As well as being in an area where they are uncommon, your planned granny flat must offer something that is different, or irresistible to prospective buyers. Maybe it has luxurious (or rustic) style fittings and features, or perhaps it has affordable and council-friendly exteriors that blend in with the rest of your property. These are a sure way to increase value and attract buyers when the time comes.
  • Only building on a property that is positively geared, unless you intend to benefit/profit from it in other areas (by sub-letting/renting out as a B&B as part of a business, for example).
  • Spending a quarter of the property’s base value won’t guarantee a profitable return in every case, so take the time to make a number of plans, with varying costs to find which one will suit your short and long term goals best.

We’ll touch on it one last time, because it is so important and will help each side of the fence, whichever one you’re on. Remember, the why of why you want to build is paramount, and how it can be profitable, long term too, for various reasons.

I Just Want to Add $$$ Value to My Property

  • Cost per m² to build and fit-out with quality materials using reputable builders.
  • Meet an existing demand for granny flats in the property market for that area.
  • My property is positively geared and I know my dwelling will be a unique feature in my area and buyer’s market.

I Might Not Make an Immediate Profit, but…

  • I can utilize the extra space for my own business, using it as a tax deduction.
  • I could rent the dwelling out as a short or long term lease (As an Air B&B, as mentioned earlier).
  • My folks are doing well now, but down the track I want them to be closer, so I can look after them in their retirement age.
  • There really are no granny flats in my area, building one might increase the value of my place.
  • Prices could go up in my area, and we have almost finished/have finished paying the place off.

The above are just some core and useful ideas/tips from the professionals, who are generally people who see the best and worst when it comes to selling property. They have an eye for what will sell, and it cannot be stressed here enough: If there is no demand for a granny flat in your area’s sale market, it is unlikely that it will add value to your property, if at all.

Related Questions

Do I Need Council Approval?

Most likely. Always check with your local council before considering moving on to the planning stage. Most councils are more than happy to help.

How Would I Know if There is a Demand for Granny Flats in My Area?

Check out your local real estate agent’s website. Have a look. Are there any on offer? Contact a few agents and ask, they’ll be the first to tell you if there’s a market for them, especially if you hint that you might be interested in buying one!

Can I Afford It?

Only you can find this out. If your property is negatively or positively geared, you would still need to have a variety of costed options to present to a bank if you are seeking additional funding for your build. If you intend to rent or utilize the space for your own or someone else’s business, get some financial advice on how best to put this together as a business plan to show the bank.

Will I Really Not Have to Mow That Stinky Patch of Yard Every Week?

You bet! That’s the best part. If you can see a wasted/empty space on your existing property, it could be a sign that there’s some way to either monetize it, or get value through its practical use as a living or personal/business space.

Does My Granny Flat Have to be an External Building?

By their very definition, a granny flat is a separate dwelling, but the above information can be easily (and profitably) adapted if you can build/extend onto an existing property or utilize another space (Basement or loft etc.) As long as the core factors have been addressed as to its financial/practical viability, then it is certainly possible. If it increases the livable space of your property, is professionally built with excellent and new/tidy fittings, it will usually add more value than a dusty old space any day.

Summing Up

If you are in an existing property with some empty space (up to 60 m²) and you can see a smaller, very purpose built dwelling there, then a granny flat could well be the value-adding, practical and beautiful space-filler you have been missing out on.

Yes, you will need to do some homework to be sure it will work, but if there are a distinct lack of granny flats in your area, it’s financially viable, and you’re allowed to build one, then why not consider it?

The urban sprawl is contracting on itself, and depending on your property’s position within the buyer’s market, the addition of a granny flat could add value, as well as speed up the sales process if and when the time comes. Look at the unique picture when considering it. Your location, reasons for and against, financial viability, council approval, and future benefits must be thought about first and foremost. And once your pre-thought about whether or not a granny flat is right for you has been taken care of, you’ll be able to stand by whatever decision it is that you’ve made.

Granny flats are no longer a thing of the past, but for many; a gateway to better living and a beautiful addition that adds both practical and financial value.


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