"Inquiry rates for granny flats soar in WA"

"INQUIRY rates for granny flats have soared this year and they're not all planned as a home for older relatives.

Specialist builders say there has been “a substantial increase” in the number of people asking about ancillary accommodation or “granny flats’’ since the State Government announced in March it would change legislation to allow the flats to be rented to non-relatives.

Investment experts said the legislation changes, gazetted on August 2, would be a “game changer’’ for Perth.

Granny flat builders, including Granny Flats WA, Granny Flat Innovations, Concept Steel Constructions and Factory Direct, have all noted the “dramatic increase” in inquiries.

Granny Flat Innovations general manager Chris Johnston said the hits on the firm’s web page had tripled since the Government’s announcement.

And Granny Flats WA managing director Mike Nicholls said the interest was coming from homeowners and investors.

“Most interest is from people 55 to 75 looking to rent out their larger house,” Mr Nicholls said.

“But the rental market is bringing in the younger demographic who want to put granny flats on their investment properties and double their income.

“There have been a lot of inquiries from FIFO workers.”

Sales, however, had yet to pick up.

Factory Direct general manager Trevor Massey said the market was still in the “research phase”.

“It’s like building a house. The first step is research,” said Mr Massey, who predicted an increase in sales in the coming months.

Hegney Property Group chief executive Gavin Hegney said the new legislation would be a “game changer” that would increase housing densities in Perth suburbs built in the ‘60s, ‘70s and ‘80s.

“The knock-on effect of more people in those suburbs would mean the local businesses would grow,” he said.

“Where previously those suburbs may not have been able to support a cafe, they might be able to with increased density.”

Mr Hegney said that if the trend developed as expected, blocks of more than 450sq m would become increasingly popular.

Momentum Wealth managing director Damian Collins, who held a sold-out investment seminar last Tuesday featuring the new granny flat laws, predicted the accommodation would be popular with investors chasing higher yields.

He tipped properties with granny flats in “decent areas” to attract yields of 7 per cent.

“You won’t have to go into risky areas, like mining towns, to get those yields,” Mr Collins said.

A new granny flat as an investment property would also have tax depreciation benefits, he said.

Mr Hegney said there would be significant financial gains for investors, with an estimated 14 per cent return on the costs of establishing a granny flat.

“It can turn a negatively, or neutrally geared property, into a positively geared property,” Mr Hegney said.

Granny flats could be a wise long-term investment, helping to pay the mortgage initially, before being used as crash pad for teenagers, and then for extra retirement income in later years.

But he warned that if even a portion of the family home was used to provide an income, it would affect the property’s capital gains tax-free status.

“People will need to look at their own financial circumstances and decide what’s right for them,” Mr Hegney said.

Real Estate Institute of WA president David Airey said people would also get tax exemptions for maintenance on that part of their property, as they would for any investment.

But he said homeowners should do their homework because they were not likely to get the same investment return on a granny flat as they would on a property on a separate strata title.


CORNERING THE INVESTMENT MARKET

A CORNER block with a three-bedroom, two-bathroom house would be the ideal investment property to add a granny flat to, according to Hegney Property Group boss Gavin Hegney.

“Some properties are better suited than others,” Mr Hegney said.

“It’s pretty hard to go past a three-bedroom, two-bathroom with a 1x1 granny flat.

“The value of that property would stand on its own right.

“A corner site would be best, because both could have a street frontage.”

Mr Hegney warned investors to be aware that the cost of a granny flat would not always be equal to the value it added to the property.

A two-bedroom, one-bathroom granny flat added to a four-bedroom, two-bathroom home may not equal a six-bedroom, three-bathroom home, Mr Hegney said.

Momentum Wealth managing director Damian Collins said investors would also have to consider an area’s demographics and planning codes to determine whether a granny flat suited their property.

“You need to think who the prospective clients are,” Mr Collins said.

“If it’s a 4x2 and in a family area, the renters might really value that backyard,” he said.

“If it’s an older three-bedroom, one-bathroom shared by a couple or three adults, they may not.”


A RING OF POTENTIAL

THE best areas for granny flats are in Perth’s “middle-belt”, where many homes were built in the 1960s and 1970s, Hegney Property Group chief executive Gavin Hegney said.

He said these areas had big blocks, good tenant demand, and rental returns that could soon cover the initial cost outlay.

“If you drew a ring around the city, it would be areas like Melville, Bull Creek, Leeming, Kardinya, Queens Park, Belmont, Bassendean, Morley, Dianella, parts of Maylands, Balcatta and Osborne Park,” Mr Hegney said.

Momentum Wealth managing director Damian Collins said granny flats would not work as well in higher priced areas, such as the Western suburbs, where they would probably devalue the property.

“There will be demand for this kind of housing in a lot of areas – people are happy to live in smaller homes these days,” Mr Collins said.

“But you need to understand who the target market is.

“They’ll be popular with fly-in, fly-out workers who want lock-up-and-leave properties, or in student areas, such as around Curtin (university) and ECU.”"

This article was sourced from PerthNow and was written by Claire Bickers.