At present one in five (18%) of Australia’s households hold two generations and some ten percent (9%) hold three generations. These figures are expected to rise to 24% and 13%, respectively, within the next decade.
Yet our analysis into this market segment has found that less than 5% of Australia’s existing housing stock successfully caters to this multi-generational market.
Recent analysis by CoreLogic has found that building a secondary self-contained home in the backyard can lift the overall properties value by up to 30% and adds around 27% to an investment properties previous rental income.
This work by CoreLogic also found that there were 655,000 properties in Sydney, Melbourne and Brisbane that met the criteria for an additional self-contained backyard dwelling.
Our work has found that the inclusion of a $225,000 to $250,000 backyard home (including development approval and infrastructure costs) – in the Brisbane context – can achieve gross rental yields of between 8% to 10% for permanent tenancies and between 15% and 20% for short-term occupancies.
Our work has also found that middle-ring detached homes with a fully-compliant and high quality one-bedroom secondary residence resell for between 12% and 15% more than other dwellings in the same location without a secondary abode.
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A typical backyard home design, size and general look.
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What are the rules?
Most local authorities encourage a variety of housing options to meet residents’ diverse and changing needs.
Under most planning schemes a ’dwelling house’ can include outbuildings, extensions and secondary dwellings like a backyard home.
A standard building approval is all you need, in most cases, to build a backyard home.
However, in most cases you will need to lodge a development application if:
The secondary dwelling is bigger than 80 square metres in size.
The secondary dwelling is more than 20 metres away from the main house.
If you intend to rent the backyard home to a ‘non-household’ member.
And sometimes if there isn’t going to be enough off-street parking.
What is a ‘non-household’ member?
A ‘household’ is defined as an individual, or a group of related or unrelated people, who reside at the same address, with the common intention to live together and who make mutual provision for food or other living essentials, like doing the laundry or car pooling.
A ‘household’ can also include up to five children under the age of 18 that are not related and one or two adults who care for them.
A ‘household’ can also include up to five people – regardless of age - that are not related.
This parameter seems to scare a lot of folks off building a backyard home. It shouldn't especially if the rental use is long-term and tenants are respectful of the property and immediate neighbourhood.
End comment
The demand for backyard housing solutions is high and rising.
The supply of housing that caters well for multi-generational and unrelated household members is in short supply.
For mine local authorities that embrace his latent demand will see more new homes built and especially ones that are affordable and house younger demographics.
Councils, the ball is in the your court!
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Hypothetically this makes sense. But I build them for a living and I can confirm that no building approval is standard anymore. All Granny’s and second dwellings trigger SOMETHING! Approval costs and time frames are blowing out. Hence why cubits went broke 2 weeks ago. They were a massive granny company. Councils are a cancer creating chaos.
The ATO has rules regarding granny flats and self-contained flats. In some cases rent would have to be declared and the property partly subject to capital gains tax. Centrelink also has rules regarding how the property would be valued.