Significant Fonzie and granny flat development growth across NSW
McLennan Steege Smith & Associates provide valuations for homeowners building “Fonzie” and granny flats in Sydney.
People of a certain age might remember Arthur “Fonzie” Fonzarelli who lived in a flat above the Cunningham’s garage in the 1970’s hit series Happy Days. While the series might be a distant memory the concept of building flats above garages and separate dwellings or ‘granny’ flats is alive and well and it’s is picking up pace thanks to State Government policy, increased demand, investment opportunities, housing affordability and changing demographics.
Different states have different rules for Fonzie and granny flat development. In New South Wales granny flats can be used as income producing second developments and Fonzie flats can be built above garages for new developments (subject to Council approval). While granny flats must be included on the main title, Fonzie flats that are strata subdivided from the main house can be sold separately. To date Western Australia, Tasmania, The ACT and the Northern Territory allow granny flats to be rented, this is not the case in Queensland, Victoria and South Australia.
A recent newspaper article highlighted that the western districts of Sydney have seen an increase in granny flat construction of 24 percent over the last two years. Also, NSW Department of Planning and Environment data indicates that 4818 new granny flats were built during 2014 which is nearly double the 2867 built the previous year and three times more than the 1511 built in 2010. The top local government areas that are experiencing a granny flat boom include Bankstown, Auburn, Fairfield, Penrith, Warringah, Holroyd, Parramatta and The Hills.
It has been reported that a number of councils have been fast tracking development applications or decreasing the amount of paperwork required for granny flat and fonzie flat developments. Also, that Sydney granny flats are renting from between $300 to $700 per week with rental yields of up to 15%. Many people are using granny flats and fonzie flats as a way to subsidise large mortgages.
The NSW State Environment Planning Policy (SEPP) details a number of requirements related to granny flat development. Some of those include:
- Lot size must be minimum 450 square metres.
- Size of the granny flat maximum 60 square metres.
- Not permitted on environmentally sensitive land.
- Heritage restrictions apply.
- Once the development is completed only one principal and one secondary dwelling must exist.
- Once the granny flat is constructed, the lot can’t be subdivided.
- Granny flats are not permitted on strata subdivided lots or in community title schemes.
- There must not be external alterations to the principal dwelling other than an additional entrance.
Local Environmental Plans (LEP) also apply to granny flat developments but if there is an inconsistency between the SEPP and the relevant Council’s LEP, the provisions of the SEPP will override those in the extent of the inconsistency.[i]
From a valuations perspective the team from McSSA have seen a dramatic increase in the number of people constructing granny flats over the past few months. Greater Western Sydney, in particular, has experienced significant growth across the local government areas of Auburn, Bankstown, Blacktown, Canterbury, Camden, Campbelltown, Fairfield, Hawkesbury, Holroyd, Liverpool, Parramatta, Penrith, The Hills Shire and Wollondilly.
 Australian Financial Review, Mar 21 2015