Could a Granny Flat Be the Answer to Softer Property Growth?
Capital growth has slowed and waiting for the market to do the work is no longer enough. Here’s why investors and advisers are turning to granny flats to manufacture returns from land they already own.
- Residential property growth has softened nationwide. Sitting and waiting won’t cut it anymore.
- Property investors and advisers are actively recommending granny flats as a way to manufacture returns from land you already own.
- A granny flat can help you move toward positive gearing faster, without buying a new property.
- Not every block is suitable. Due diligence on easements, zoning, and council rules matters before you commit.
- In NSW, many builds can be fast-tracked through Complying Development, with no full DA required.
- 5 Star Granny Flats deliver Sydney builds in under 4 months, with a 4-week approval guarantee.
The Australian property market has changed. Growth that investors once took for granted has slowed, and the strategy of buying, holding, and waiting for the market to do the work is no longer enough on its own.
So what do you do when your investment isn’t performing the way you need it to? You get active.
That’s exactly what a growing number of investors and property advisers are saying. And one of the most overlooked strategies for doing it sits right in the backyard.
Why the Market Has Changed and What It Means for You
Residential property values across Australia have softened. For investors who have relied on capital growth to do the heavy lifting, that’s a problem. Cash flow that once looked manageable has tightened, and the path to positive gearing has stretched out.
The instinct for many has been to look elsewhere, with interest in commercial property growing as a result. But there’s another move that costs significantly less, leverages what you already own, and can shift your numbers faster than almost any alternative.
“You can’t just sit and wait for the market to do its own growth.”
Bobby Haeri, Founder, Acquisition House, via Smart Property Investment
Bobby Haeri, founder of property buyer’s agency Acquisition House, has been direct about where he’s pointing his clients. In a recent episode of The Smart Property Investment Show, he said that adding a granny flat, or second dwelling, to a residential property is one of the most underrated cash flow strategies available to Australian investors right now.
His firm is actively recommending it. Not as a passive play, but as a deliberate, active strategy to strengthen portfolios that are underperforming in a flat market.
What Does “Manufacturing Returns” Actually Mean?
Most property investment is passive. You buy, you hold, and you hope the market moves in your favour. That’s a fine strategy when growth is strong. In a soft market, it’s a liability.
Manufacturing returns means doing something to the asset itself to increase its income potential. A granny flat is one of the clearest examples of this. You’re not relying on the suburb to grow. You’re adding a second rentable dwelling to a block you already own, creating a second income stream from land that was previously sitting idle.
It’s the difference between waiting and doing something about it.
Is a Granny Flat a Good Investment in a Soft Market?
Yes, with the right property and the right approach. Here’s why it works when the broader market is flat.
You move toward positive gearing faster
A second rental income from a granny flat can significantly reduce or eliminate the cash flow gap on your investment. Instead of topping up a negatively geared property from your own pocket every month, you’ve got a second rent cheque helping to cover holding costs.
You don’t need to buy another property
Acquiring a new investment property in a soft market means navigating stricter lending conditions, higher holding costs, and continued uncertainty about growth timelines. A granny flat leverages what you already own, without adding a new mortgage or a new set of risks.
You create a point of difference in the rental market
Sydney’s rental market is tight. A well-designed, purpose-built granny flat stands out. Tenants want quality, privacy, and a modern fit-out. Deliver that, and you’ll attract strong tenants and achieve strong rents.
You add value to the asset itself
A quality granny flat doesn’t just generate income. It adds to the capital value of your property. When the market does recover, that investment compounds.
Thinking about selling your investment because it’s underperforming? Haeri’s view is clear: don’t sell unless you genuinely can’t afford to hold. If you have the cash flow and the buffers, a granny flat can be the move that makes holding worth it.
Not Every Block Works. Here’s What to Check.
This is the part most people skip. And it’s the part that matters most.
Adding a granny flat isn’t something you can do on every block. Before you commit to a strategy that hinges on building one, you need to know whether your block can actually support it. There are obvious issues, and there are the ones you won’t see until a professional looks at the site properly.
- Block size is at least 450m² with a minimum 12-metre frontage
- Rear setback of at least 3 metres, and 0.9 metres from the side boundaries
- No easements cutting through the area where you plan to build
- No stormwater pipes that would be disrupted by construction
- No overhead power lines crossing the build zone
- Slope and drainage are manageable for a build of this size
- Site access is clear for construction machinery
- The property is not subject to bushfire or flood overlay restrictions
Your conveyancer plays a role here. Haeri specifically called out the importance of proper due diligence before purchasing a property with granny flat potential. Get a Section 10.7 (formerly Section 149) Planning Certificate from your local council to understand what’s permitted on the land.
If you already own the property and you’re not sure, a free site inspection from 5 Star Granny Flats will answer that question quickly, with no obligation.
What About the Approval Process?
One of the biggest misconceptions about building a granny flat is that it requires a lengthy council approval. In NSW, that’s often not the case.
Most granny flats that meet standard complying development criteria can be approved through the CDC (Complying Development Certificate) pathway. This is a fast-track process that bypasses a full Development Application entirely, meaning no months of waiting, no council submissions, no uncertainty.
At 5 Star Granny Flats, we manage the entire approval process in-house and guarantee CDC approval within 4 weeks. We’ll also tell you upfront if your build needs a DA instead, so you’re never caught off guard. Our CDC vs DA guide explains both pathways in detail.
One Block. Two Income Streams.
Here’s something most people don’t know: if your block is over 450m², NSW’s complying development rules may allow you to build both a 60m² granny flat and a 36m² studio on the same lot.
That’s two separate rental incomes from a single property. Two dwellings you didn’t need to buy separately. Both ancillary to the main home, both under one fast-track approval.
It’s one of the most efficient ways to maximise the yield of a site, and most homeowners have no idea it’s an option.
Frequently Asked Questions
Got questions about granny flat investment? Here are the ones we hear most often.
Are granny flats a good investment in a soft property market?
They can be, with the right block and the right design. Instead of waiting for capital growth, a granny flat adds a second rental income to land you already own. That can close the cash flow gap on a negatively geared property and move you toward positive gearing faster, while also adding to the capital value of the property.
How much rental income can a granny flat generate in Sydney?
It depends on location, size and fit-out. As a guide, well-positioned two-bedroom granny flats in Western Sydney and the Hills District are renting for roughly $500 to $650 per week, with one-bedroom and studio designs typically a little lower. A free site inspection can give you a realistic estimate for your suburb.
What block size do I need to build a granny flat in NSW?
To use the fast-track Complying Development (CDC) pathway, your block generally needs to be at least 450m² with a minimum 12-metre frontage, a 3-metre rear setback and 0.9-metre side setbacks. Smaller or irregular blocks may still be possible through a Development Application.
Do I need council approval to build a granny flat?
Not always. In NSW, granny flats that meet the complying development criteria can be approved by a private certifier through a CDC, without a full council DA. If your property doesn’t qualify, a DA through council is the alternative. 5 Star Granny Flats manages either pathway and guarantees CDC approval within 4 weeks.
What should I check before buying a property with granny flat potential?
Check the block size and frontage, setbacks, easements, stormwater pipes, overhead power lines, slope and drainage, site access for machinery, and any bushfire or flood overlays. Ask your conveyancer to review the Section 10.7 (formerly Section 149) Planning Certificate from council before you commit.
How long does it take to build a granny flat?
With 5 Star Granny Flats, CDC approval is guaranteed within 4 weeks and Sydney builds are delivered in under 4 months. Timeframes can vary with site conditions, weather and the approval pathway, which is why we confirm everything after the site inspection.
Can I build a granny flat and a studio on the same block?
Yes, in many cases. If your block is over 450m², NSW’s complying development rules may allow both a 60m² granny flat and a 36m² studio on the same lot, as long as the main dwelling is already there. That means two rental incomes from one property under one fast-track approval.
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