Granny flats are no longer only for grannies.

Granny flats seem to be becoming more prevalent and popular than before, Housing Industry Association senior economist Shane Garrett says.

“It does add value to people’s homes,” Mr Garrett said.

“There are of course situations where it does what it says and the granny flat is actually used to house granny.

“For others, it’s a way of generating additional rent on their home.”

Riki Tawhara, Hills District and western Sydney manager for buyer’s agents Cohen Handler, says many clients want to capitalise on land values when they buy a house, which typically does not have as strong an investment yield as a unit or townhouse.

“We’re seeing a lot of them buying houses and looking to get a granny flat built,” Mr Tawhara said.

“It just gives buyers the opportunity to be able to buy houses and own land and still get a good yield.”

Not all states and councils allow granny flats, which are typically limited to 60 square metres in size, to be rented out.

NSW introduced measures in July 2009 to make it easier to get secondary dwellings or granny flats approved.

The number of development applications for granny flats in NSW grew by almost 20 per cent to 3,640 in 2014/15, state planning department data shows.

Mr Tawhara says one of his clients has a two-bedroom granny flat on her property in Queens Park that is rented out for $600 a week.

“This one is pretty much your own little house. It’s completely separate from the house so they’ve got their own little driveway, their own little yard. It’s really, really nice.”

The interest in granny flats is a logical response to the increase in land and dwelling prices, Mr Garrett says.

“They can borrow the home equity and construct a granny flat, which in turn increases the value of the home further.”

In many cases a granny flat can make more optimal use of a backyard space, Mr Garrett says.

Some people use granny flats to cater for family members other than grandparents, such as providing a secure retreat for teenagers.

Mortgage broker Mortgage Choice spokeswoman Jessica Darnbrough says there has been a big step-up in homeowners with a decent-sized block considering putting in a self-contained unit, to rent out if allowed.

But she cautions homeowners to do their research, as even the financing options for building a separate flat differ to those for accommodation joined to a house.

“In the first instance homeowners need to check the relevant requirements because regulations regarding construction and occupancy do vary from state to state and council to council, so they really have to do their due diligence and make sure they’re working within the right parameters.”

They also need to consider how to get services such as electricity to the granny flat and whether it is for granny or a renter, in which case will there be street access and parking.

“It’s not just about do you have the room in your backyard,” Ms Darnbrough said.

“It’s about what do you plan to do with the granny flat.”

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