澳洲Australia property Granny Flat Saturation | Sydney


在澳大利亚 The pool at of an IP needs to be resurfaced (or so the pool doctor says), the cost was estimated to be $10K ($10,000), after recoverying from my impresssion of a cat coughing up a fur ball, it just seems far too much. Its just a standard poo I need some advice regarding a property purchase. Property - semi-detached house Bedrooms - 2 Condition - average needs internal reno to modernise Street - one of the best in suburb Location - excellent Close to schools - yes Transport - 50m


Hi All,

Just a thought but with the NSW SEPP regulations having been in play for a little while now and with what appears to be granny flat fever amongst investors I wanted to start a little bit of a debate on the long term implications.

Firstly is there a risk that this changed usage to dual occ' on a larger scale may be adversely affecting the local markets? Or conversely is it benefitting the areas?

I know for the investor it greatly improves the yield, but from the capital perspective it would appear that you do not get a dollar for dollar return, when generally most general reno’s you would expect at least $2 for every $1 invested.

Further to this are you not also restricting your market when it comes to on selling?

Is there maybe a short term opportunity to pick up some great value pre existing dual occ' properties whilst the initial outlay isn’t being reflected in the value and will this change?

Anyway just a few questions to get the ball rolling and sure there will be more from those who have been there and done it or are doing it. (Particularly keen to here the thoughts of the buyers agents such as Propertunity and Jacque and the GF developers like Brazen)

This may of course all just be conjecture but I’m curious as to what everyone’s thoughts are on how this might play out.  

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My observations from watching the western sydney market where the "stick a box in the backyard" fad is still going strong..

* Houses with a granny flat behind take much longer to rent than one without, have rent reductions before they rent, and come back onto the rental market more often. I can think of a number of properties in my local area which are back on the rental market every 6 months.

* Asking prices for some granny flats are stupidly high, approaching a similarly sized unit (or sometimes exceeding) so they can take a long time to rent. Yes they are often more modern inside, but that doesnt make up for the fact you are living in a weatherboard box/someones garage in a backyard.

* Granny flats seem to stay rented for a long time once tenanted, whether a rent reduction is negotiated over listed price who knows.


I am not a fan of the build a a box in the backyard fad. In my mind, if you have to manufacture return with this and the property doesnt work as an investment without cramming as many tenants into a property as possible, then it was not a good investment to start with.

Unless its a huge block, people (especially families) do like having a backyard, and families with children are always going to be nervous of having a stranger living in the backyard.  

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mrmonopoly said: ↑
Firstly is there a risk that this changed usage to dual occ' on a larger scale may be adversely affecting the local markets?Click to expand...
Bear in mind that this 'granny flat legislation' came into effect in Feb 2009 and is NSW state-wide, so its impacts are not just 'local' markets but all NSW markets.

I believe it has to go someway to addressing the (NSW at least) housing shortage. Rental vacancies have been sub-1% in many parts for some years now. Open for rental inspections with a 15 minute timeslot and a dozen or more intending tenants is commonplace. Rental auctions are still happening as tenants get into bidding wars. Rents are still rising due to demand.

We find that the granny flats are always in high demand by tenants:
1. Pensioners that do not want to live in a unit block and perhaps want a bit of a garden to potter around in.
2. Divorcees – typically 40 – 50 year old single males or females (50% of marriages fail, unfortunately).
3. Young couples just starting out.
Their only other options really are the unit market, so this has to be providing some kind of service.

mrmonopoly said: ↑
I know for the investor it greatly improves the yield,Click to expand...
Yes it does. The other alternatives for investors are new builds which is not particulary attractive at present. Lenders, post GFC, are ultra conservative lending on even small villa & t/house developments.

mrmonopoly said: ↑
.....but from the capital perspective it would appear that you do not get a dollar for dollar return, when generally most general reno’s you would expect at least $2 for every $1 invested.Click to expand...
Yes, that is correct, but bear in mind that adding a granny flat is not a reno. It is a development. For your $80K spend you are getting, as a LL, a $250pw return. That's over a 16% return on your money.

mrmonopoly said: ↑
Further to this are you not also restricting your market when it comes to on selling?Click to expand...
Yes and no. A swimming pool for instance will also restrict your market when you are selling too.

The market, as I see it, for reselling a home and granny flat is:
1. Other investors seeking yield
2. People with aged parents that can live independently but who need to be kept an eye on, in case of sickness, a fall, etc
3. People with teenage kids who want to move out of home - with their drum kits etc
4. Parents who have kids move back home after a relationship failure, or baby etc
5. People who just want to earn some extra rent money from the flat while they live in the house as a PPOR.  

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DaveMSydney said: ↑
Asking prices for some granny flats are stupidly high, approaching a similarly sized unit (or sometimes exceeding) so they can take a long time to rent..Click to expand...
Are you saying that granny flat should be rented for less than a similar size unit?

Most of the problems you listed are valid but it can be avoided if the land is larger and properly fenced off. It is very similar to battle- axe development.

If you are planning to hold the property for a long term (say more than 20 years and beyond) then I don't see any problem at all!  

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DaveMSydney said: ↑
My observations from watching the western sydney market where the "stick a box in the backyard" fad is still going strong..Click to expand...
It is not just W Sydney where this is happening. ;)

Since Wyong Shire Council recently removed Sec 94 contributions for granny flats, I am advised there has been a flood of new applications, despite the council staffer quoted in a recent newspaper article saying, "We are not expecting a flood of applications".:)

DaveMSydney said: ↑
* Houses with a granny flat behind take much longer to rent than one without, have rent reductions before they rent, and come back onto the rental market more often.Click to expand...
It is true that there are a lower pool of tenants to select from, which can lead to a slightly higher vacancy rate. This kind of set-up does not suit all tenants as they are effectively sharing a property. Note how to mitigate:
1. Vacancy rates are likely to continue to be tight, so this should not be a problem if you adhere to the same stringent property selection criteria applied to any other property purchase.
2. There is always a market for property offered for rent at the right price. The house rent can be lower by comparison to a similar standalone house on its own land. Lower rent is attractive to some tenants. This is more than compensated for by the rent received from the granny flat. e.g. If a standalone 3brm house might rent for $380pw, then it may only rent for $350pw if the yard is shared with a granny flat. However the granny flat may rent for $220-250pw.

DaveMSydney said: ↑
I can think of a number of properties in my local area which are back on the rental market every 6 months.Click to expand...
This comes down to careful tenant selection and the skill of the Property Manager that you engage to manage the property. e.g. you wouldn’t put a young single male who wants to have his mates around with loud music and parties, in the granny flat, with say, a retired couple, living in the front house.

Sometimes conflicts do arise (personality conflicts or tenants that do the wrong thing or park in the wrong spot for example) and they have to be managed. But remember this is handled by the Property Manager. This same thing happens in unit blocks.

In my personal experience, when you get a well matched house tenant & granny flat tenant, they often stay many, many years. We have house tenants that mow the grass for granny flat tenants and likewise granny flat tenants that do the odd baby-sitting assignment for house tenants. Happy tenants = low vacancy rates = maximized yield for LLs.

DaveMSydney said: ↑
* Asking prices for some granny flats are stupidly high, approaching a similarly sized unit (or sometimes exceeding) so they can take a long time to rent.Click to expand...
Rents are (and should be) similar for a granny flat or a similar sized unit. I my experience, granny flats do not take long to rent at all.

DaveMSydney said: ↑
Yes they are often more modern inside, but that doesnt make up for the fact you are living in a weatherboard box/someones garage in a backyard.Click to expand...
You have to think like a tenant not a LL. Just because you don't want to live in a granny flat does not mean others don't.

DaveMSydney said: ↑
* Granny flats seem to stay rented for a long time once tenanted, whether a rent reduction is negotiated over listed price who knows.Click to expand...
No rent reductions - we do regular rent increases just like any other property. Tenants like living there.

DaveMSydney said: ↑
In my mind, if you have to manufacture return with this and the property doesnt work as an investment without cramming as many tenants into a property as possible, then it was not a good investment to start with.Click to expand...
Untrue, based on a false assumption. The house on land might have been in an area of reasonable CG and showing a 5-6% yield. Now with a granny flat, you have a house & a granny flat on land in an area of reasonable CG and showing a 7-8+% yield. That did not make the original house on land a bad investment :confused:  

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devank said: ↑
Are you saying that granny flat should be rented for less than a similar size unit?

Most of the problems you listed are valid but it can be avoided if the land is larger and properly fenced off. It is very similar to battle- axe development.

If you are planning to hold the property for a long term (say more than 20 years and beyond) then I don't see any problem at all!Click to expand...
All I am saying is that a GF is often constructed to a far lesser standard than an equivalent unit.

Some GF' are built great, and fit in with the look and feel of the home and surroundings. No problem with these myself, its like you say, almost a battleaxe.

What I dont like is what looks like a demountable buildinig plonked on stumps in a backyard, often up way too high, or a fibro/clad garage. Built cheap, dont fit in, not fenced properly or with dodgy access. These are what I see siting on the market for ages.

There are some great yields out there for dual occ, a tastefully done one will certainly add value for future resale to other investors.

But what irks me is cheaply built untasteful ones, I see them as a devaluer of a property. And with cheap ones appearing in backyards everywhere, it does change the feel of a street and I would expect that to have a knockon effect on prices, potentially in a negative way.

My opinion only of course. :) Maybe I am too old fashioned :D  

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DaveMSydney said: ↑
But what irks me is cheaply built untasteful ones, I see them as a devaluer of a property. And with cheap ones appearing in backyards everywhere, it does change the feel of a street and I would expect that to have a knockon effect on prices, potentially in a negative way.Click to expand...
Dave, I think that's true even of a reno or addition to a home. We've all driven down streets and seen some terrible renos/additions that detract from the original property.  

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The difference between a properly built granny flat and some shoddy extension/conversion is key IMO

For it to add any value long or short term it should be properyly detached and fenced off from the original house, have proper street driveway access (not some tiny lanely through the side of the front house) and should be at least 2 beds. The design should also be as 'house-like' as possible and not some rectangular demountable with exposed plumbing

Most of the ones I see vacant are pretty poor quality but you never see the really nice 100k build ones on the market for very long at all

Fencing is soo important aswell - seriously worth the 1k investment to fence off the two houses!



I think in the next decade when baby boomers hit retirement, the house + granny flat will be in higher demand for families who don't want to/can't send their parents to a crappy retirement village  

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How does the granny flat being rented whilst you live in the main house as PPOR go for tax? I assume you can have a QS do a depreciation report on the granny flat alone and use the figures provided to nominate part of the loan for negative gearing?  

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FormerLurker said: ↑
How does the granny flat being rented whilst you live in the main house as PPOR go for tax? I assume you can have a QS do a depreciation report on the granny flat alone and use the figures provided to nominate part of the loan for negative gearing?Click to expand...
Yes, correct.

Also there would be CGT issues to be calculated on sale.  

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Should be treated very similar to how home-office setups right?  

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Hi all, we had concerns about renting a house and granny flat seperately in future flat rental market but also liked the granny flat idea. So we bought an IP on a corner block with 43 m frontage on one of the streets. This way, about a third of the block can be cut off from the main house with a fence and a granny flat installed with it's own street front, road access and yard. The main house still has plenty of yard, and for it's tenants, it will really be no different from living next door to a house on another block. Therefore, privacy and security all round and hopefully quality tenants and minimal vacancies for us.

Cheers, Ali  

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Granny Flat

Hiya

My house in Greystanes has changed 2 lots of tenants but so far, granny flat tenant is still there since the beginning:) (and by all accounts wants to be forever ???)


And yes, Alan there are a lot of singles (men and women ) out there as well as divorcees turning up to look for such accomodation...

When you have such a shortage of rentals (well at least within a 20km radius of central Sydney) IMHO there will be a high demand yet for granny flats for some time. My Korean friend is looking for a house to rent in Epping, Carlingford, Pennant Hills and THornleigh...but very difficult. She said the last time she looked in Epping, 40 lots of family turned up:eek: She was booted out of her unit and had to move in 4 weeks time as landlord wanted unit back....

Nope i would not want to be a tenant in Sydney atm...  

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Cheers everyone. Some really good points raised.

So essentially it is the quality GF developments including proper design integration, and appropriate segregation from the primary dwelling that seem to be fairing best?

In general I like this way of manufacturing better yields, but I am definately concerned about the long term ramifications of capital growth on properties altered in this way, although I really liked the point about the ageing population/baby boomer shift in demographics.

Can anyone tell me if I am right in thinking that currently valuers are tending to value dual occ' properties based on comps of similar sized single occ properties i.e. 3 bed + 2 bed GF dual occ = 5 bed single occ?

If this is the case then is anyone seeing much in the way of ready made decent dual occ property come to the market?

If so surely this would present potentially good buying?  

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I have had zero problems renting my granny flat in Nowra. I had endless people approach me during settlement. 1 tenant only so far and he is great and has no intention of moving. About 1 in 5 people show concern for the flat when they inspect the main house but most don't even know it's there. It's a corner block with the flat access to the side in central town so location plays a big part.
A local builder is building endless house + flats in worrigee on Nowras outskirts often filling a whole street and it's not looking too nice with neighbour friction. Questionable tenants and just plain ugly looking buildings.
Location and design play a big part.  

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mrmonopoly said: ↑
Cheers everyone. Some really good points raised.

So essentially it is the quality GF developments including proper design integration, and appropriate segregation from the primary dwelling that seem to be fairing best?Click to expand...
This is CRUCIAL. Proper planning for access, visual/acoustic privacy and parking provision is imho essential. If you want to keep tenants happy you must create as much separtion as possible in order to make both the principle dwelling and the granny flat attractive to tenants.

I often get prospective clients that want to build a granny flat on a block which will be only 2m from the main house and 3m from the rear boundary- because the main dwelling is only around 10m from the rear boundary. I advise them to NOT do it.

Tenants need privacy. You really need back yards that are at least 15m long and then you can create a pseudo 'battle-axe' allotment. You can use trees (pencil pines are good) and fencing that's splayed to increase this privacy. Just food for thought....all I know is I'm flat out getting granny flats approved.

So you really need a long-ish back yard; unless of course it's for their family...but even then I ask them if they intend to live in that house until they die, because a prospective buyer will look at these things.

Yes, Ive said that to clents. They 'generally' appreciate the advice.:eek:  

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mrmonopoly said: ↑
Cheers everyone. Some really good points raised.

So essentially it is the quality GF developments including proper design integration, and appropriate segregation from the primary dwelling that seem to be fairing best?Click to expand...
This is CRUCIAL. Proper planning for access, visual/acoustic privacy and parking provision is imho essential. If you want to keep tenants happy you must create as much separtion as possible in order to make both the principle dwelling and the granny flat attractive to tenants.

I often get prospective clients that want to build a granny flat on a block which will be only 2m from the main house and 3m from the rear boundary- because the main dwelling is only around 10m from the rear boundary. I advise them to NOT do it.

Tenants need privacy. You really need back yards that are at least 15m long and then you can create a pseudo 'battle-axe' allotment on. You can use trees (pencil pines are good) and fencing that's splayed to increase privacy.  

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I am actually looking for a property with a granny flat as my next PPOR.
Got to house the mother in law.(yes I know, in for a world of pain).

I actually think with an ageing population that they might become more popular. We got to stick the oldies somewhere.  

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House with granny flat

Hmmm....

i actually saw one with a granny flat scenario last week...too exxy for me but may suit someone who is buying his own PPOR .....:) PM me if interested.  

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brazen said: ↑
This is CRUCIAL. Proper planning for access, visual/acoustic privacy and parking provision is imho essential. If you want to keep tenants happy you must create as much separtion as possible in order to make both the principle dwelling and the granny flat attractive to tenants.

I often get prospective clients that want to build a granny flat on a block which will be only 2m from the main house and 3m from the rear boundary- because the main dwelling is only around 10m from the rear boundary. I advise them to NOT do it.

Tenants need privacy. You really need back yards that are at least 15m long and then you can create a pseudo 'battle-axe' allotment. You can use trees (pencil pines are good) and fencing that's splayed to increase this privacy. Just food for thought....all I know is I'm flat out getting granny flats approved.

So you really need a long-ish back yard; unless of course it's for their family...but even then I ask them if they intend to live in that house until they die, because a prospective buyer will look at these things.

Yes, Ive said that to clents. They 'generally' appreciate the advice.:eek:Click to expand...


Thanks Brazen. Definately something I'll be keeping a close eye on going forward. Are you seeing many come back on to the general market?  

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