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Granny flat growth in Australia is booming

The Smithies granny flat has a 39 square metre deck and a spa bath out the front.Source:News Limited

A SURGE in granny flat construction in Australia is helping more than just grandparents.

Homeowners with backyards are using granny flats to keep adult kids at home, build man-caves and “she-sheds’ and to generate income by renting it to travellers.

Research by Gateway Credit Union has found that one-third of homeowners are considering a granny flat, and another 22 per cent are open to the idea.

The main reasons are to provide extra recreation space for family or as a home office, while ageing parents rank down the list. Women were more likely to take in afamily member, the research found.

Gateway Credit Union CEO Paul Thomas says there has been an “explosion” ingranny flat construction, and the average $100,000 cost of building a granny flat is much less than the cost of an apartment.

“There are plenty of granny flat builders and, as with any construction, (you need to) research the options well,” he says.

Sharon and Ted Smithies built a modern two-bedroom granny flat in their backyard for daughters Alana, 25 and Madi, 22.

With 60 square metres of living space, a deck covering 39 square metres and a nearby spa bath, it has become the social headquarters of the local surf club, Smithies says.

The Smithies granny flat has a 39 square metre deck and a spa bath out the front.Source:News Limited

“It was to keep the family together,” she says. “We knew the girls wanted a little independence and we do have a nice large block of land.]

“It’s been an absolute blessing.”

Carolyn Parrella, general manager at landlord insurer Terri Scheer Insurance, says it’s important to know the value of a granny flat.

“Generally it’s on the same title, so it creates a bit of murkiness,” she says. “There’s more to think about than a stand-alone property.

“If people are using it as a rental property, it’s the same as any other rental property. Look after it in a professional manner, have a property manager do inspections and make sure you have insurance.”

If you’re using a granny flat for income, talk with your insurance company or alandlord insurer to make sure the risks are covered, Parrella says.

Some states allow people to build a granny flat for financial gain, while others are reviewing their laws.

Gateway’s Thomas says Australia has the second-largest AirBNB market behind the US. “People have really seen the value of their backyard and seized the opportunity to provide travellers with an alternative to expensive hotels,” he says.

Thomas says when it comes to financing granny flats, people can look at borrowing more from their existing lender, but be watch out for extra costs.

“Lenders will often charge a higher rate if the property is to be rented or used as a business premise,” he says.

“The other alternative is a construction loan. These are paid in stages so borrowers can draw down the money they need, as they are building, and therefore they don’t pay interest on the whole loan from the start.”

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