10 Things To Consider Before Building A Granny Flat

10 Things To Consider Before Building A Granny Flat

Whether you’re looking to boost the value of your property, need a separate lodging for your relative or just want to build a man cave/femme den, a granny flat is definitely the way to go. However, there are quite a few misconceptions about the planning and building process. What is and isn’t allowed? We take a look at the legalities.

With property prices soaring around the country, it’s no wonder many Aussies are looking to leverage the value sitting in their own backyard. Granny flats have certainly increased in popularity, particularly since property prices have continued to surge. And it looks as though this trend is set to continue.

The customer-owned banking institution Gateway Credit Union recently conducted research that showed one third of homeowners are currently considering the addition of a granny flat, with a further 22 per cent saying that they may consider this in the future.

According to the research, the top uses for granny flats include additional space for recreation (32 per cent), a home office (25 per cent), additional rental income from tenants or Airbnb (23 per cent), to house aging parents (20 per cent) and so children can stay at home longer (17 per cent.)

As granny flats increase in popularity, it’s usual to encounter some common misconceptions about them. Let’s bust some notorious myths to discover the facts before you consider whether a granny flat is the right choice:

Myth #1: It’s hard to get approval to build a granny flat

Some Australian states and local councils have strict planning and building regulations regarding the approval, construction and use of granny flats. However, in NSW, WA, NT, ACT and TAS new planning policies have been introduced to increase the supply and availability of affordable rental housing. As a result it’s easier to get the construction of a granny flat approved – provided all the required criteria are met.

Myth #2: It takes a long time to get approval

In NSW, WA, NT, ACT and TAS the timeline for approvals is actually quite compact – much like the size of the property you’re trying to get approved. Current council approvals average between 6-8 weeks and private certification is as fast as 10 days. However, in other states the process can take up to a year with severe usage restrictions.

Myth #3: You need a lot of land

The minimum land size needed to build a granny flat can vary across local councils. A good guide is to have at least a 450m2 block of land. Even though you may have the space, it’s important to remember that regulations limit the building of only one secondary dwelling on each lot.

Myth #4: The size of the granny flat doesn’t matter

As a general rule of thumb, granny flats must be under 60sqm. Regulation does vary from state to state, with a few local councils allowing carports and porches to take up additional space (above the allotted 60sqm). Check what your local council allows before you commit to a design.

Myth #5: You have to subdivide your property

You may be able to separate the mailing address, and arrange for individual utility bills; however, building a granny flat does not permit the actual subdivision of your property – unless it’s already allowed under a local planning scheme.

Myth #6: The granny flat has to be detached to the main dwelling

Whilst you can build a separate dwelling on your lot that is completely detached from the main house, there are also alternative building types to consider. For example, you can convert part of your existing home into an ancillary dwelling by separating one part of the house.

Alternatively, you can add an extension such as an extra room or add a second storey above a garage. Building above the garage is also known as a Fonzie flat, and in NSW this does fall under different subdivision legislation.

Myth #7: No one wants to rent a granny flat

A granny flat is actually a great rental prospect. If it’s well built, close to public transport, universities and supermarkets, it can be a desirable but small rental home. In fact in Sydney’s competitive rental market, granny flats rents average $292.46 per week and are currently attracting a higher rate of growth than houses or apartments .

Myth #8: You can’t use a granny flat for investment purposes

With the easing of granny flat rental regulations in NSW, WA, NT, ACT and TAS, homeowners can now earn an income by renting out their granny flat. In other states, secondary dwellings can add to property values, with buyers attracted to the extra space for use as a home office or guest bedroom.

Myth #9: A granny flat is just a cheap, low quality kit home

Whilst there are many cheap, all-inclusive granny flat kits on the market, they’re certainly not your only option. Depending on your needs, you may opt for an architecturally designed granny flat that works harmoniously with the main dwelling. Every property is unique – so look for the solution that works best for your property and budget.

Myth #10: It’s hard to get finance

Not all financial institutions are aware of the changing needs of your living requirements, so it’s important to find a lender that has experience in granny flat financing. They must be able to offer the option of a construction loan, or the choice to access equity in your property for the specific purpose of building a granny flat. At Gateway, we offer Australia’s first purpose-designed granny-flat loan that makes it even easier for those wanting to add a secondary dwelling.

Alexis Airey is the Chief Customer Officer at Gateway Credit Union.


  • I kinda feel like this should’ve been marked as sponsored content at the top of the article or on the post link, rather than just having an author byline that reveals a financial interest right at the end :/

    • Thanks for your comment rensa. This wasn’t sponsored content. Advertorials and sponsored posts are always flagged upfront.

      We sometimes feature guest posts from industry experts on topics we think our readers might be interested in. These posts are always carefully vetted to ensure they contain worthwhile advice (and don’t just promote the contributor’s own products.) Hope this helps!

  • Myth #11 The quality of every builder’s workmanship and material is not equal.(Ensure Australian Standards)
    Myth #12 The lowest and highest quotes do not determine the worst and best construction.(Seek proof of happy, past customers)
    Myth #13 Being an owner/builder is not the best and cheapest solution.(Subbies generally don’t like small, one-off jobs and some want a deposit prior to doing any work, very risky)

  • Another thing – well it’s neither a myth nor a misconception, but it’s not generally .known – is that if the granny flat is detached from the main house, and you use it as an investment (ie rent it for profit to a third party, and claim expenses), then when you sell it and your home you need to calculate capital gains on the portion of time and area represented by the GF and pay capital gains tax on it. If, however, the GF is attached to the main house, then irrespective of how it is used you will never pay CGT on it. But it means you need to comply with stringent 60 minute fire supression rules – and get it certified.

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