Australia has a housing problem. Are granny flats the solution to the crisis?

Like many other developed nations, Australia is grappling with a housing crisis. The combination of soaring rental rates, a growing number of single-occupant households, and increasing migration levels have resulted in a severe shortage of affordable housing options, creating a supply-demand imbalance. 

But how bad is the problem? A recent report released by CoreLogic, Archistar, and Blackfort in October 2023, highlights a simple solution to this crisis - the development of granny flats.

The report points out that the country is expected to face a shortfall of 106,300 homes over the next five years. While the Australian government has set an ambitious target of 1.2 million well-placed homes to tackle the issue, proposed solutions such as build-to-rent developments and social & affordable housing are constrained by long lead times, regulatory, zoning issues, and industry shortages.

So, taking this into consideration, the report looked at residential blocks across Sydney, Melbourne, and Brisbane and suggests constructing granny flats as an immediate and cost-effective solution. These are self-contained one to two-bedroom dwellings of at least 60 square metres that can be pre manufactured and installed within existing town planning guidelines.

Where are the best Granny flat development opportunities? 

Based on the analysis from Archistar, Blackfort, and CoreLogic, over 655,000 residential properties are suitable for a granny flat across Australia’s three largest capitals. Over a third of these sites are within 2km of a train or light rail station, and 17% have a hospital within the suburb boundary, indicating their potential to provide housing for essential workers in the healthcare sector.

Of the three cities analysed, Sydney has the most opportunities for granny flat developments at 242,081 properties. Looking more broadly at Sydney council areas, the Central Coast has the most opportunities for granny flats at 41,569 or 17.2% of potential sites followed by the Northern Beaches at 19,884 or 8.2%. 

Melbourne was found to have 230,000 potential sites with Mornington Peninsula the largest opportunity in the broader Melbourne region at 23,870 sites or 10.4% of total sites. This was followed by Casey at 16,861 (7.4%). Brisbane was found to have about 185,000 suitable sites. In Greater Brisbane, the Brisbane LGA by far has the most opportunities at 184,660 or 40.5% of potential sites. 

Granny flats an opportunity for investors? 

For homeowners, adding a granny flat not only increases the value of their property but also provides an opportunity for additional rental income. For policymakers and the government, granny flats present an immediate and affordable way to meet the housing demand within existing town planning guidelines.

“Adding a granny flat accommodates extra living space for extended family, multi-generational households or rental purposes, thereby boosting a property's value and potentially creating extra income for rising living costs.” CoreLogic Research Director Tim Lawless said.

“CoreLogic figures show an extra two bedrooms, and an additional bathroom could add around 32% to the value of an existing dwelling. For a house worth $500,000, the addition of a granny flat has the potential to add approximately $160,000 to the value of the property.”

Looking for a home loan or considering refinancing? Check out some of the providers below and compare today. 

Last updated 28 May 2025 Important disclosures and comparison rate warning*
What are your home loan needs?
Loan purpose
Buying or Refinancing
  • Promoted

    Unloan Variable Home Loan

    • Investor
    • Principal & Interest
    • 20% min deposit
    • Redraw available
    Interest rate
    5.79 % p.a.
    Variable
    Comparison rate
    5.70 % p.a.
    Initial monthly repayment
    $2,931
    Go to site
    • RATE CUT NOW LIVE!
    • The first home loan with an increasing discount (conditions apply)
    • No application or banking fees
  • Promoted

    Variable Home Loan

    • Investor
    • Principal & Interest
    • 10% min deposit
    • Redraw available
    Interest rate
    6.14 % p.a.
    Variable
    Comparison rate
    6.18 % p.a.
    Initial monthly repayment
    $3,043
    Go to site
    • NRMA Home Loans has confirmed a rate cut of 0.25% p.a. effective 6 June
    • $0 application fee to pay
    • Only 10% deposit required
  • Promoted

    Home Loan

    • Investor
    • Principal & Interest
    • 40% min deposit
    • Redraw available
    Interest rate
    5.70 % p.a.
    Variable
    Comparison rate
    5.71 % p.a.
    Initial monthly repayment
    $2,902
    Go to site
    • Offset and non-offset options for flexible payments
    • No application and monthly account keeping fees
    • Get up to $4,000 cashback (T&Cs apply)
  • Home Loan

    • Investor
    • Principal & Interest
    • 40% min deposit
    • Redraw available
    Interest rate
    5.70 % p.a.
    Variable
    Comparison rate
    5.71 % p.a.
    Initial monthly repayment
    $2,902
    Go to site
    • Offset and non-offset options for flexible payments
    • No application and monthly account keeping fees
    • Get up to $4,000 cashback (T&Cs apply)
  • Fixed Rate Home Loan

    • Fixed rate
    • Investor
    • Principal & Interest
    • 10% min deposit
    Interest rate
    5.74 % p.a.
    Fixed 2 years
    Comparison rate
    6.13 % p.a.
    Initial monthly repayment
    $2,915
    Go to site
    • Extra payments allowed (fee applies)
    • No valuation fees
  • Unloan Variable Home Loan

    • Investor
    • Principal & Interest
    • 20% min deposit
    • Redraw available
    Interest rate
    5.79 % p.a.
    Variable
    Comparison rate
    5.70 % p.a.
    Initial monthly repayment
    $2,931
    Go to site
    • RATE CUT NOW LIVE!
    • The first home loan with an increasing discount (conditions apply)
    • No application or banking fees
  • Fixed Home Loan

    • Fixed rate
    • Investor
    • Principal & Interest
    • 10% min deposit
    • Redraw available
    • Cashback
    Interest rate
    5.79 % p.a.
    Fixed 2 years
    Comparison rate
    6.26 % p.a.
    Initial monthly repayment
    $2,931
    Go to site
    • Get up to $4,000 cashback (T&Cs apply)
    • Up to 12 months repayments in advance without penalties
    • Split loan available
  • Home Loan with Offset

    • Investor
    • Principal & Interest
    • 40% min deposit
    • Offset available
    • Redraw available
    Interest rate
    5.91 % p.a.
    Variable
    Comparison rate
    5.92 % p.a.
    Initial monthly repayment
    $2,969
    Go to site
    • Offset and non-offset options for flexible payments
    • No application and monthly account keeping fees
    • Get up to $4,000 cashback (T&Cs apply)
  • Solar Home Loan

    • Investor
    • Principal & Interest
    • 10% min deposit
    • Offset available
    • Redraw available
    Interest rate
    5.94 % p.a.
    Variable for 60 months and then 6.48% p.a.
    Comparison rate
    6.28 % p.a.
    Initial monthly repayment
    $2,978
    Go to site
    • Loans.com.au has confirmed a rate cut of 0.25% p.a. effective 3 June
    • Option offset sub-account
    • No ongoing fees to pay
  • Neat Home Loan

    • Investor
    • Principal & Interest
    • 40% min deposit
    • Redraw available
    Interest rate
    5.99 % p.a.
    Variable
    Comparison rate
    6.01 % p.a.
    Initial monthly repayment
    $2,995
    Go to site
    • ubank has confirmed a rate cut of 0.25% p.a. effective 29 May
    • Easy redraw facility
    • No annual fee to pay
  • Flex Home Loan

    • Investor
    • Principal & Interest
    • 40% min deposit
    • Offset available
    • Redraw available
    Interest rate
    5.99 % p.a.
    Variable
    Comparison rate
    6.23 % p.a.
    Initial monthly repayment
    $2,995
    Go to site
    • ubank has confirmed a rate cut of 0.25% p.a. effective 29 May
    • Free extra repayments
    • Multiple offset accounts available
  • Flex Home Loan

    • Fixed rate
    • Investor
    • Principal & Interest
    • 40% min deposit
    • Offset available
    • Redraw available
    Interest rate
    5.99 % p.a.
    Fixed 2 years
    Comparison rate
    6.23 % p.a.
    Initial monthly repayment
    $2,995
    Go to site
    • Multiple offset accounts available
    • Free extra repayments
    • Easy redraw facility
  • Variable Investor Home Loan

    • Investor
    • Principal & Interest
    • 10% min deposit
    • Offset available
    • Redraw available
    Interest rate
    6.09 % p.a.
    Variable
    Comparison rate
    6.13 % p.a.
    Initial monthly repayment
    $3,027
    Go to site
    • Loans.com.au has confirmed a rate cut of 0.25% p.a. effective 3 June
    • No monthly or ongoing fees
    • Option to add an offset for 0.10% p.a.
  • Variable Home Loan

    • Investor
    • Principal & Interest
    • 10% min deposit
    • Redraw available
    Interest rate
    6.14 % p.a.
    Variable
    Comparison rate
    6.18 % p.a.
    Initial monthly repayment
    $3,043
    Go to site
    • NRMA Home Loans has confirmed a rate cut of 0.25% p.a. effective 6 June
    • $0 application fee to pay
    • Only 10% deposit required
Showing 11 results from 417 home loans. Use the filters to see more

Want free expert advice on your home loan?

Looking to buy or refinance? Book a free appointment with an Aussie broker and get expert help. PLUS go in the draw to win a share of $320K!

Learn more

* WARNING: This comparison rate applies only to the example or examples given. Different amounts and terms will result in different comparison rates. Costs such as redraw fees or early repayment fees, and cost savings such as fee waivers, are not included in the comparison rate but may influence the cost of the loan. The comparison rate displayed is for a secured loan with monthly principal and interest repayments for $150,000 over 25 years.

** Initial monthly repayment figures are estimates only, based on the advertised rate. You can change the loan amount and term in the input boxes at the top of this table. Rates, fees and charges and therefore the total cost of the loan may vary depending on your loan amount, loan term, and credit history. Actual repayments will depend on your individual circumstances and interest rate changes.

Mozo provides general product information. We don't consider your personal objectives, financial situation or needs and we aren't recommending any specific product to you. You should make your own decision after reading the PDS or offer documentation, or seeking independent advice.

While we pride ourselves on covering a wide range of products, we don't cover every product in the market. If you decide to apply for a product through our website, you will be dealing directly with the provider of that product and not with Mozo.