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.
Home loan comparisons on Mozo - last updated 9 December 2023
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Featured Product
Mozo experts choice awards won:
- Low Cost Home Loan - 2023
Unloan Variable
Investment, Refinance Only
interest rate
comparison rate
Initial monthly repayment6.04% p.a. variable5.95% p.a.For refinancers only. Built by CommBank, the Unloan is the first home loan with an increasing discount (conditions apply) for investors. No application or banking fees. No monthly account keeping or early exit fees. Apply in as little as 10 minutes.
CompareCompareUnloan Variable
For refinancers only. Built by CommBank, the Unloan is the first home loan with an increasing discount (conditions apply) for investors. No application or banking fees. No monthly account keeping or early exit fees. Apply in as little as 10 minutes.
- interest rate
- 6.04% p.a. variable
- comparison rate
- 5.95% p.a.
- variable rate
- 6.04% p.a.
- comparison rate
- 5.95% p.a.
- Upfront fees
- $0
- Ongoing fees
- $0.00
- Discharge Fee
- $0.00
- Extra repayments
- yes - free
- Redraw facility
- yes - free
- Offset account
- no
- Maximum loan to value ratio
- 80.00%
- minimum borrowing amount
- $10,000
- maximum borrowing amount
- $10,000,000
- type of mortgage
- Variable
- Repayment types
- Principal & Interest
- Availability
- Investor
- Repayment options
- Weekly, Fortnightly, Monthly
- Special Offers
- -
Read our Mozo Review to learn more about the Unloan Unloan Variable
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Offset Home Loan
Package, Investment, LVR<70%, Principal & Interest
interest rate
comparison rate
Initial monthly repayment6.44% p.a. variable6.69% p.a.Up to 10 offsets. Competitive rate tiers and interest only repayment option. No application fee. Split loan option. Fast, secure online application. $248 annual fee.
CompareCompareOffset Home Loan
Up to 10 offsets. Competitive rate tiers and interest only repayment option. No application fee. Split loan option. Fast, secure online application. $248 annual fee.
- interest rate
- 6.44% p.a. variable
- comparison rate
- 6.69% p.a.
- variable rate
- 6.44% p.a.
- comparison rate
- 6.69% p.a.
- Upfront fees
- $350
- Ongoing fees
- $248.00 yearly
- Discharge Fee
- $400.00
- Extra repayments
- yes - free
- Redraw facility
- yes - free
- Offset account
- yes
- Maximum loan to value ratio
- 70.00%
- minimum borrowing amount
- $150,000
- maximum borrowing amount
- $10,000,000
- type of mortgage
- Variable
- Repayment types
- Principal & Interest
- Availability
- Investor
- Repayment options
- Monthly
- Special Offers
- -
Read our Mozo Review to learn more about the Macquarie Offset Home Loan
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SMSF Home Loan
LVR <70%
interest rate
comparison rate
Initial monthly repayment6.99% p.a. variable7.00% p.a.Enjoy a competitive rate on your SMSF home loan with Loans.com.au. Available for refinancers only. No application fee and no settlement fee. No monthly, annual or ongoing fees. Unlimited extra repayments. Online access via Smart Money App. 30% deposit required.
CompareCompareSMSF Home Loan
Enjoy a competitive rate on your SMSF home loan with Loans.com.au. Available for refinancers only. No application fee and no settlement fee. No monthly, annual or ongoing fees. Unlimited extra repayments. Online access via Smart Money App. 30% deposit required.
- interest rate
- 6.99% p.a. variable
- comparison rate
- 7.00% p.a.
- variable rate
- 6.99% p.a.
- comparison rate
- 7.00% p.a.
- Upfront fees
- $720
- Ongoing fees
- $0.00
- Discharge Fee
- $0.00
- Extra repayments
- yes - free
- Redraw facility
- no
- Offset account
- no
- Maximum loan to value ratio
- 70.00%
- minimum borrowing amount
- $50,000
- maximum borrowing amount
- $1,000,000
- type of mortgage
- Variable
- Repayment types
- Principal & Interest
- Availability
- Investor
- Repayment options
- Weekly, Fortnightly, Monthly
- Special Offers
- -
Read our Mozo Review to learn more about the loans.com.au SMSF Home Loan
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Well Balanced
Investor, Principal & Interest, LVR <80%
interest rate
comparison rate
Initial monthly repayment6.39% p.a. variable6.42% p.a.Competitive low rates available for investors. Free online redraws. 100% offset account for a small fee ($10 p/mth). Get a free evaluation (Valued up to $300). Fast online application. Minimum loan amount $100K.
CompareCompareWell Balanced
Competitive low rates available for investors. Free online redraws. 100% offset account for a small fee ($10 p/mth). Get a free evaluation (Valued up to $300). Fast online application. Minimum loan amount $100K.
- interest rate
- 6.39% p.a. variable
- comparison rate
- 6.42% p.a.
- variable rate
- 6.39% p.a.
- comparison rate
- 6.42% p.a.
- Upfront fees
- $785
- Ongoing fees
- $0.00
- Discharge Fee
- $300.00
- Extra repayments
- yes - free
- Redraw facility
- yes - free
- Offset account
- Optional - $10 per month
- Maximum loan to value ratio
- 80.00%
- minimum borrowing amount
- $200,000
- maximum borrowing amount
- $2,000,000
- type of mortgage
- Variable
- Repayment types
- Principal & Interest
- Availability
- Investor
- Repayment options
- Weekly, Fortnightly, Monthly
- Special Offers
- -
Read our Mozo Review to learn more about the Well Money Well Balanced
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Basic Home Loan
Fixed, Investment, Principal & Interest, LVR <70%
interest rate
comparison rate
Initial monthly repayment6.69% p.a.
fixed 3 years6.54% p.a.Lock in repayments from 1 to 5 years. Competitive rate tiers depending on your LVR. No application or annual fee. Fast, secure online application.
CompareCompareBasic Home Loan
Lock in repayments from 1 to 5 years. Competitive rate tiers depending on your LVR. No application or annual fee. Fast, secure online application.
- interest rate
- 6.69% p.a.
fixed 3 years
- comparison rate
- 6.54% p.a.
- variable rate
- p.a.
- comparison rate
- 6.54% p.a.
- Upfront fees
- $350
- Ongoing fees
- $0.00
- Discharge Fee
- $400.00
- Extra repayments
- yes - up to $10,000 p.a.
- Redraw facility
- yes - free
- Offset account
- no
- Maximum loan to value ratio
- 70.00%
- minimum borrowing amount
- $150,000
- maximum borrowing amount
- $10,000,000
- type of mortgage
- Fixed
- Repayment types
- Principal & Interest
- Availability
- Investor
- Repayment options
- Monthly
- Special Offers
- -
Read our Mozo Review to learn more about the Macquarie Basic Home Loan
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Fixed Home loan
50%-60% LVR, Investment, Interest Only
interest rate
comparison rate
Initial monthly repayment6.54% p.a.
fixed 3 years6.24% p.a.Competitive rate tiers for investors only. Leverage the equity you have built up for a lower interest rate. Enjoy a super-fast application process. Split up to 10 loans against your property. Optional offset accounts. Unlimited fee-free transactions. Interest only option.
CompareCompareFixed Home loan
Competitive rate tiers for investors only. Leverage the equity you have built up for a lower interest rate. Enjoy a super-fast application process. Split up to 10 loans against your property. Optional offset accounts. Unlimited fee-free transactions. Interest only option.
- interest rate
- 6.54% p.a.
fixed 3 years
- comparison rate
- 6.24% p.a.
- variable rate
- p.a.
- comparison rate
- 6.24% p.a.
- Upfront fees
- $0
- Ongoing fees
- $0.00
- Discharge Fee
- $0.00
- Extra repayments
- yes - up to 5% of outstanding loan balance per year
- Redraw facility
- yes - free
- Offset account
- no
- Maximum loan to value ratio
- 60.00%
- minimum borrowing amount
- $100,000
- maximum borrowing amount
- $2,500,000
- type of mortgage
- Fixed
- Repayment types
- Interest Only
- Availability
- Investor
- Repayment options
- Weekly, Fortnightly, Monthly
- Special Offers
- -
Read our Mozo Review to learn more about the Athena Fixed Home loan
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Offset Home Loan
Package, Investment, LVR<60%, Principal & Interest
interest rate
comparison rate
Initial monthly repayment6.44% p.a. variable6.69% p.a.Up to 10 offsets. Competitive rate tiers and interest only repayment option. No application fee. Split loan option. Fast, secure online application. $248 annual fee.
CompareCompareOffset Home Loan
Up to 10 offsets. Competitive rate tiers and interest only repayment option. No application fee. Split loan option. Fast, secure online application. $248 annual fee.
- interest rate
- 6.44% p.a. variable
- comparison rate
- 6.69% p.a.
- variable rate
- 6.44% p.a.
- comparison rate
- 6.69% p.a.
- Upfront fees
- $350
- Ongoing fees
- $248.00 yearly
- Discharge Fee
- $400.00
- Extra repayments
- yes - free
- Redraw facility
- yes - free
- Offset account
- yes
- Maximum loan to value ratio
- 60.00%
- minimum borrowing amount
- $150,000
- maximum borrowing amount
- $10,000,000
- type of mortgage
- Variable
- Repayment types
- Principal & Interest
- Availability
- Investor
- Repayment options
- Monthly
- Special Offers
- -
Read our Mozo Review to learn more about the Macquarie Offset Home Loan
* 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.
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