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Australia’s Property Boom Spurs Interest in ‘Granny Flats’
With Affordable Housing Scarce, Homeowners Build Backyard Apartments to Rent Out
Australia’s backyards are being replaced by ‘Granny Flats’ as a property boom puts homeownership out of reach for many Australians. The WSJ’s Rebecca Thurlow reports on why these tiny dwellings are becoming the new thing.
By
REBECCA THURLOW
Updated Feb. 10, 2015 11:22 p.m. ET
5 COMMENTS
DEE WHY, Australia—In Australian backyards, manicured lawns, flower beds and trampolines are making way for the latest emblem of the country’s booming housing market: granny flats.
These tiny dwellings, also known as “mother-in-law apartments” or “in-law suites,” are the latest craze in a housing boom that started in Sydney and has now spread to other parts of the country, putting homeownership out of reach of many Australians.
In Warringah, the electorate of Australian Prime Minister Tony Abbott just north of Sydney, the shortage of affordable housing is so acute that some lower-income workers, such as policemen, have to commute daily from more than 100 miles away. Others decide to sleep in cars or on friends’ couches, government officials say.
For Constable Brendan Buko, getting to his job at Dee Why police station in Warringah Council from his home on the central coast, means a round trip as long as four hours, depending on traffic. Some days, especially after a 12-hour overnight shift, he is forced to pull his car into a rest area for a nap before continuing the journey home.
Lately, the 26-year-old has seen his fiancée—also a police officer in the nearby town of Gosford—once or twice every couple of weeks because of the shift work and long commute.
ENLARGE
Shane O'Neill lives in a granny flat behind his mother's house in western Sydney. He had saved money for a deposit but it wasn’t enough to buy a home. PHOTO: REBECCA THURLOW/THE WALL STREET JOURNAL
“We’re either asleep or at work and pretty much pass each other in the hallway, and that’s about it,” he said. The young constable grew up in Dee Why, but was forced out by rising rents and house prices, in an area where he said a “cheap and nasty” house starts at upward of 800,000 Australian dollars (US$624,000). The median house price in the area is about A$1.2 million, up roughly 30% in the past two years.
Mr. Buko isn’t alone in his struggle to keep up with the rising cost of real estate here. A third of the police academy graduates chosen for the broader Northern Beaches area declined to sign up because they couldn’t afford to live there on a starting wage, said Michael Regan, Warringah’s mayor. More than half of the current police force commutes from outside the area. Such trends are fueling concerns about the provision of basic services.
“We aren’t being alarmist. We think it’s an emergency,” Mr. Regan said.
Sydney ranks in the world’s 10 most expensive cities for prime residential property: One million U.S. dollars will buy you a home measuring around 41.2 square meters (443 square feet)—only slightly larger than a similar property in New York—according to a survey by Knight Frank.
Nationally, house prices in major cities have risen 22% since early 2012, according to RP Data CoreLogic , a property-research firm. Sydney saw the largest rise in the year through January, with a 13% increase, while Melbourne prices were up 7%, the firm said.
MORE IN PROPERTY REPORT
“Demand has basically skyrocketed,” said Mark Moumdjian, operations manager at Ian Cubitt’s Granny Flats and Studios, a contractor. “We build in excess of 300 a year, whereas, say about five years ago, we were doing more like 30 or 40 a year.”
Australia sidestepped the global financial crisis largely because of the strength of its mining industry. Real-estate prices kept climbing at a time when those in many other Western markets were falling. That means the recent price increases are off an already-high base. The Reserve Bank of Australia this month cut interest rates to a record-low 2.25% to aid an economy that is slowing as a decadelong mining boom fades. The low rates are fueling property speculation from investors ranging from Australian baby boomers to wealthy Chinese looking for yield, and shutting out first-time buyers.
‘The great big patch of grass down the back was really only used by the dogs. ... I’m not sure how many investments there are in the world where you put down A$130,000 and get a return of A$35,000 a year.’
—Property Owner Jeff Cox, who built a two-bedroom apartment behind his home.
“I had money put aside for a deposit, but it wasn’t enough,” said Shane O’Neill, a 41-year-old pawn-store manager who moved into a granny flat behind his parents’ western Sydney home last June.
“To me, it’s beautiful,” he said from the cabinlike unit he shares with his Labrador, Sandy, one afternoon. “I still walk in and get that fresh paint smell.”
Meters away in the main house live his parents, sister and a baby niece. “It saves petrol coming to visit,” Mr. O’Neill said. “I can come home and be with them every day and come up here after and do my own thing.”
In the prime minister’s electorate, officials are considering easing building restrictions even further to boost the supply of cheap housing—including allowing units to be erected in front yards as well as in backyards, and abolishing a ban on granny flats in semirural areas where many wealthy residents live in grand, sprawling homes with tennis courts, pools and private stables for race horses.
Jeff Cox, a property owner in the leafy suburb of Mona Vale, on Sydney’s Northern Beaches, paid about A$130,000 to erect a two-bedroom, 60-square-meter granny flat behind his home.
“The great big patch of grass down the back was really only used by the dogs running down there from time to time and the lawn mower man coming to mow it,” Mr. Cox said. “I’m not sure how many investments there are in the world where you put down A$130,000 and get a return of A$35,000 a year for good.” He collects A$680 a week renting the tiny unit to strangers. Next door, his neighbor is also building a granny flat.
Local workers “need somewhere to live too that’s not 10,000 miles away,” Mr. Regan, the mayor, said from his council office, moments from the beachfront.
http://www.wsj.com/articles/austral...-interest-in-granny-flats-1423593357?mod=e2fb
I did something similar several years ago, money well spent.
With Affordable Housing Scarce, Homeowners Build Backyard Apartments to Rent Out
Australia’s backyards are being replaced by ‘Granny Flats’ as a property boom puts homeownership out of reach for many Australians. The WSJ’s Rebecca Thurlow reports on why these tiny dwellings are becoming the new thing.
By
REBECCA THURLOW
Updated Feb. 10, 2015 11:22 p.m. ET
5 COMMENTS
DEE WHY, Australia—In Australian backyards, manicured lawns, flower beds and trampolines are making way for the latest emblem of the country’s booming housing market: granny flats.
These tiny dwellings, also known as “mother-in-law apartments” or “in-law suites,” are the latest craze in a housing boom that started in Sydney and has now spread to other parts of the country, putting homeownership out of reach of many Australians.
In Warringah, the electorate of Australian Prime Minister Tony Abbott just north of Sydney, the shortage of affordable housing is so acute that some lower-income workers, such as policemen, have to commute daily from more than 100 miles away. Others decide to sleep in cars or on friends’ couches, government officials say.
For Constable Brendan Buko, getting to his job at Dee Why police station in Warringah Council from his home on the central coast, means a round trip as long as four hours, depending on traffic. Some days, especially after a 12-hour overnight shift, he is forced to pull his car into a rest area for a nap before continuing the journey home.
Lately, the 26-year-old has seen his fiancée—also a police officer in the nearby town of Gosford—once or twice every couple of weeks because of the shift work and long commute.
Shane O'Neill lives in a granny flat behind his mother's house in western Sydney. He had saved money for a deposit but it wasn’t enough to buy a home. PHOTO: REBECCA THURLOW/THE WALL STREET JOURNAL
“We’re either asleep or at work and pretty much pass each other in the hallway, and that’s about it,” he said. The young constable grew up in Dee Why, but was forced out by rising rents and house prices, in an area where he said a “cheap and nasty” house starts at upward of 800,000 Australian dollars (US$624,000). The median house price in the area is about A$1.2 million, up roughly 30% in the past two years.
Mr. Buko isn’t alone in his struggle to keep up with the rising cost of real estate here. A third of the police academy graduates chosen for the broader Northern Beaches area declined to sign up because they couldn’t afford to live there on a starting wage, said Michael Regan, Warringah’s mayor. More than half of the current police force commutes from outside the area. Such trends are fueling concerns about the provision of basic services.
“We aren’t being alarmist. We think it’s an emergency,” Mr. Regan said.
Sydney ranks in the world’s 10 most expensive cities for prime residential property: One million U.S. dollars will buy you a home measuring around 41.2 square meters (443 square feet)—only slightly larger than a similar property in New York—according to a survey by Knight Frank.
Nationally, house prices in major cities have risen 22% since early 2012, according to RP Data CoreLogic , a property-research firm. Sydney saw the largest rise in the year through January, with a 13% increase, while Melbourne prices were up 7%, the firm said.
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“Demand has basically skyrocketed,” said Mark Moumdjian, operations manager at Ian Cubitt’s Granny Flats and Studios, a contractor. “We build in excess of 300 a year, whereas, say about five years ago, we were doing more like 30 or 40 a year.”
Australia sidestepped the global financial crisis largely because of the strength of its mining industry. Real-estate prices kept climbing at a time when those in many other Western markets were falling. That means the recent price increases are off an already-high base. The Reserve Bank of Australia this month cut interest rates to a record-low 2.25% to aid an economy that is slowing as a decadelong mining boom fades. The low rates are fueling property speculation from investors ranging from Australian baby boomers to wealthy Chinese looking for yield, and shutting out first-time buyers.
‘The great big patch of grass down the back was really only used by the dogs. ... I’m not sure how many investments there are in the world where you put down A$130,000 and get a return of A$35,000 a year.’
—Property Owner Jeff Cox, who built a two-bedroom apartment behind his home.
“I had money put aside for a deposit, but it wasn’t enough,” said Shane O’Neill, a 41-year-old pawn-store manager who moved into a granny flat behind his parents’ western Sydney home last June.
“To me, it’s beautiful,” he said from the cabinlike unit he shares with his Labrador, Sandy, one afternoon. “I still walk in and get that fresh paint smell.”
Meters away in the main house live his parents, sister and a baby niece. “It saves petrol coming to visit,” Mr. O’Neill said. “I can come home and be with them every day and come up here after and do my own thing.”
In the prime minister’s electorate, officials are considering easing building restrictions even further to boost the supply of cheap housing—including allowing units to be erected in front yards as well as in backyards, and abolishing a ban on granny flats in semirural areas where many wealthy residents live in grand, sprawling homes with tennis courts, pools and private stables for race horses.
Jeff Cox, a property owner in the leafy suburb of Mona Vale, on Sydney’s Northern Beaches, paid about A$130,000 to erect a two-bedroom, 60-square-meter granny flat behind his home.
“The great big patch of grass down the back was really only used by the dogs running down there from time to time and the lawn mower man coming to mow it,” Mr. Cox said. “I’m not sure how many investments there are in the world where you put down A$130,000 and get a return of A$35,000 a year for good.” He collects A$680 a week renting the tiny unit to strangers. Next door, his neighbor is also building a granny flat.
Local workers “need somewhere to live too that’s not 10,000 miles away,” Mr. Regan, the mayor, said from his council office, moments from the beachfront.
http://www.wsj.com/articles/austral...-interest-in-granny-flats-1423593357?mod=e2fb
I did something similar several years ago, money well spent.