The property market is an interesting beast, mostly characterised by increasing property prices, the recent downturn/correction which commenced in Oct 2017 has required some creative thinking by homeowners’ keen to offset losses and future proof their dwellings from the next correction, should one occur at an important stage of life. Over 500,000 Australians have found a solution, do you know what it is?
On Facebook you only see the best of people’s lives, the good or ‘A’ side as its commonly called. The property market is not Facebook, it has two sides. What many choose to ignore is that the property market has a habit of showing its bad side occasionally. The recent fall in property prices is not a rare event, however.
On a National level, since 1980, there have been (8) eight downturns, all of which followed periods of gains. The recent downturn has been widely publicised and cautiously I would suggest that we have started to see signs of recovery, linked to interest rates, first home buyer schemes, buyer demand and lower price points. Despite this cooling housing market, many of the housing challenges that have plagued Australians show no signs of diminishing. Deposit points, rising rents and the cost of entry still prove to be a barrier for many and living with parents is a stark reality for many.
For homeowners, many have not yet considered what a downturn would mean if they were approaching retirement, or simply didn’t like the idea of downsizing?
Over 500,000 Australians nationally have found the answer in their backyard, delivering huge benefits in terms of extra space, extra income or safety.
First, let’s consider the costs involved. Building a self-contained one-bedroom granny flat costs around $120,000 and an extra bedroom costs around $80,000 more. It’s a relatively small outlay, but according to CoreLogic modelling it could boost the value of the existing dwelling by 30 per cent. For example, adding a granny flat to a $500,000 property could see its market value rise to $650,000 – a significant return on investment.
Then there’s the potential rental income that a granny flat can deliver.
Homeowners could capitalise on the popularity of Airbnb and look at offering short-term accommodation to holidaymakers, or they could meet the demand for affordable housing by offering a long-term rental. Leasing a granny flat could be a popular alternative to leasing a typical unit because the rent tends to be less expensive. This is likely to appeal to many people on tighter budgets who would otherwise be priced out of their ideal area, and the research shows that many of the large blocks of land with potential for a granny flat are in affluent spots, such as Sydney’s Northern Beaches.
Building a granny flat could also be an affordable way for homeowners to generate extra space for their adult children. Having a self-contained unit provides young adults with additional privacy and provides them with greater independence while they’re living with their parents in the medium to long-term. Having the grandkids around is a bonus, although babysitting duties may increase significantly.
Finally, there are the broader benefits that building a granny flat could deliver. If the owners of every one of the 583,440 eligible properties decided to build a flat, it could see more than $87.5 billion invested in the construction industry. That’s a huge cash injection, providing work for builders, electricians, plumbers and other professionals.
While the granny flat concept may originally have been conceived to keep elderly parents close, their relevance to the multiple challenges that people face today could see them enjoy a renaissance. For homeowners with the space to build an additional dwelling, granny flats are a golden opportunity to positively shape the current housing landscape.
Banks and lending institutions have some great construction loan options. Consult the broker team at Launch Money to get an understanding of how to fund a secondary dwelling.
Steve Purcell is located at our Head office and is the licensee of Launch Properties. He holds a PSBA License, is a licensed Auctioneer and holds a Master’s Degree in Business. Steve brings an extraordinary depth of hands on experience to the role, including twenty years in commercial and residential construction, followed by ten years in residential Real Estate sales and property development. This unique blend enables Steve to provide advice on selected developers, to ensure they are providing functional, quality assets with high quality finishes to mitigate potential sector risks to our clients. Become a client of Steve’s and get access to RP Data suburb reports, market valuations and advocacy options.
To speak with a property expert, call our team on (02) 9009 2428 or email: email@example.com