New analysis of all residential properties across Australia’s three largest capitals has identified more than 655,000 sites suitable for the construction of a granny flat, offering a solution to help ease the housing shortage.

Granny flats: Where are the greatest opportunities for development? by national town planning research platform Archistar, real estate construction lender Blackfort, and property data and analytics provider CoreLogic assessed every residential block across Sydney, Melbourne and Brisbane to determine how many individual properties have building potential for a self-contained two-bedroom unit.

Sydney is home to the most granny flat development opportunities with around 242,000 suitable properties, representing 17.6% of the metro region's housing stock. Melbourne has almost 230,000 potential sites, representing 13.2% of stock, while Brisbane has almost 185,000 suitable sites, representing 23.3% of houses across the metro region.

Of these sites, more than a third (36%) are within two kilometres of a train or light rail station and 17% have a hospital within the suburb boundary, demonstrating a combination of accessibility and opportunity to fast-track housing options for essential workers in the health care sector.

CoreLogic Research Director Tim Lawless said the results highlight significant untapped development potential which could go some way toward fast tracking a partial remedy to the housing shortage in the country's largest cities.

“NHIFC forecasts indicate the national housing market is likely to be undersupplied to the tune of 106,300 dwellings over the next five years,” Mr Lawless said.

“For policy makers and government, granny flats present an immediate and cost-effective opportunity to deliver much needed housing supply within existing town planning guidelines. For homeowners, the addition of a second self-contained dwelling provides an opportunity to provide rental housing or additional accommodation for family members, while at the same time, increasing the value of their property and potentially attaining additional rental income.” 

Archistar co-founder Dr Benjamin Coorey said accommodating the growing population within these larger capitals is a critical issue that flexible housing solutions can help address.

“Since granny flat developments leverage existing lot areas and require no changes to town planning regulation, they offer an immediate opportunity to address housing shortages and affordability pressures expected in the coming five years for both buyers and renters.”

Top Sydney council regions and suburbs

Sydney is home to the most granny flat development opportunities, with 242,081 existing residential dwellings fitting the zoning, land area and existing home position requirements to build a granny flat.

Across Sydney’s council regions, the Central Coast hosts the most granny flat development opportunities, with 41,569 or 17.2%, of all potential sites. The Northern Beaches (19,884 / 8.2%), Hornsby (18,344 / 7.6%), Blacktown (17,909 / 7.4%) and Ku-Ring-Gai (14,617 / 6.0%) round out the top five regions.

At a suburb level, neighbouring North-West suburbs show the highest opportunities for granny flat development. Baulkham Hills (4,673 / 43.3%), Castle Hill (4,423 / 39.8%), Cherrybrook (3,421 / 61.8%), Carlingford (2,910 / 46%) and West Pennant Hills (2698 / 49.3%) stand out due to their larger land areas compared to inner-city neighbourhoods.

“Sydney’s household formation is forecast to outpace supply from 2025, with the most significant undersupply expected through 2025 and persist up until 2026 at -15,900 dwellings,” Mr Lawless said.

Top Melbourne council regions and suburbs

“Melbourne is expected to face a major housing shortage from 2023 to 2027, with a deficit of 23,800 dwellings, which is nearly twice the anticipated shortfall of 12,100 new dwellings in Sydney during the same period,” he said.

Within Melbourne's broad regions, the Mornington Peninsula offers the highest potential for granny flat development, with 23,870 sites which make up 10.4% of the total sites across the city. Casey (16,861 / 7.4%), Monash (13,960 / 6.1%), Knox (13,741 / 6.0%) and Manningham (13,063 / 5.7%) round out the top five municipalities for the most granny flat development sites.

East of Melbourne’s CBD, the suburbs of Glen Waverley (4,009 / 27.4%), Rowville (3,674 / 30.3%) and Berwick (3,604 / 18.3%) show the highest opportunities for granny flat investment sites. Hotspot potential extends out to the coastal suburb of Rye (3,705 / 38.6%) and the northern suburb of Doncaster East (3,397 / 34.9%).

Top Brisbane council regions and suburbs

Mr Lawless said Brisbane’s housing supply shortfall is more imminent relative to the larger capital cities, with the current forecast of newly built housing supply short by 3,100 this year.

Across the council areas of Greater Brisbane, the Brisbane LGA has the most granny flat development sites, with 184,660 or 40.5% of all opportunities. Logan (33,414 / 18.1%), Moreton Bay (31,949 / 17.3%), Ipswich (22,569 / 12.2%) and Redland (19,243 / 10.4%) round out the top five council regions for the most granny flat development sites.

The top five Brisbane suburbs with the highest potential for granny flat development sprawl out across Brisbane’s middle and outer ring suburbs, with opportunities in The Gap (2,986 / 48.8%), Alexandra Hills (2,789 / 46%), Redbank Plains (2,479 / 30.3%), Albany Creek (2,378 / 44%) and Rochedale South (2,215 / 42.3%).

Granny flat development benefits

Mr. Lawless said there are immediate lifestyle and financial upsides for investors whose properties met the planning requirements.

“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 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.”

Dr Coorey said research showed more than a third of the sites identified are close to existing amenities and services such as transport or a hospital.

“Granny flats present a cost-effective opportunity to boost housing supply for growing capital populations close to existing infrastructure such as railways, bus routes and major road networks for state and local governments.”

“While building regulations for secondary dwellings differ state to state, this unlocks a combination of accessibility and opportunity to fast track affordable housing options for all demographics, particularly essential workers in industries such as the health care sector.”

For more information, visit https://www.archistar.ai/granny-flat.