New analysis of all residential properties across Australia’s three largest capitals has identified a swag of sites suitable for the construction of a granny flat.

While this could help to ease Australia’s burgeoning housing shortage, the bigger question is whether the numbers actually stack up.

Based on CoreLogic’s calculations, the addition of a (two-bedroom and one-bathroom) granny flat has the potential to add around $160,000 (32%) to the value of a house worth $500,000 – with the potential for additional rental income.

Will these numbers encourage homeowners to build granny flats or only remind them of the dangers of overcapitalising, especially if the land on which the granny flat is being built can’t be simultaneously subdivided?

Sydney, Melbourne & Brisbane

Research by national town planning research platform Archistar, real estate construction lender Blackfort, in conjunction with CoreLogic suggests there are 655,000 residential blocks across Sydney, Melbourne and Brisbane with the building potential for a self-contained two-bedroom unit.

Unsurprisingly, 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 around 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.

A fast-track remedy

CoreLogic research director Tim Lawless believes research 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,” Lawless said.

“For policymakers 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.”

Archistar co-founder Dr Benjamin Coorey also believes accommodating the growing population within these larger capitals is a critical issue that flexible housing solutions – like granny flats – 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, which is forecast to outpace [housing] supply from 2025, has 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 (8.2%), Hornsby (7.6%), Blacktown (7.4%) and Ku-Ring-Gai (6.0%) round out the top five regions.

At a suburban level, neighbouring North-West suburbs show the highest opportunities for granny flat development.

Based on CoreLogic data, Baulkham Hills (43.3%), Castle Hill (39.8%), Cherrybrook (61.8%), Carlingford (46%) and West Pennant Hills (49.3%) are also standouts for future granny flat development due to their larger land areas compared to inner-city neighbourhoods.

Top Melbourne council regions and suburbs

Within Melbourne’s broad region – which is expected to face a major housing shortage from 2023 to 2027 – the Mornington Peninsula offers the highest potential for granny flat development, with 23,870 sites or  10.4% of the total sites across the city.

Casey (7.4%), Monash (6.1%), Knox (6.0%) and Manningham (5.7%) round out the top five municipalities for the most granny flat development sites.

East of Melbourne’s CBD, CoreLogic data suggests the suburbs of Glen Waverley (27.4%), Rowville (30.3%) and Berwick (18.3%) have the highest opportunities for granny flat investment sites.

Hotspot potential extends out to the coastal suburb of Rye (38.6%) and the northern suburb of Doncaster East (34.9%).

Top Brisbane council regions and suburbs

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 (18.1%), Moreton Bay (17.3%), Ipswich (12.2%) and Redland (10.4%) are top five council regions with 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 (48.8%), Alexandra Hills (46%), Redbank Plains (30.3%), Albany Creek (44%) and Rochedale South (42.3%).