Granny flats can cost anywhere from $10,000 to $200,000 to build depending on the size, materials used and whether or not you are in for a DIY job or a custom upgrade. 

So, how much is a granny flat exactly and how can you finance the project?

Read on to find out the answers.

How Much Is a Granny Flat?

For those who are not familiar with the term, granny flats are smaller, self-contained dwellings built on the same zoning as the main property. They can be attached to the main house or separate and may range from a small studio (think an oversized garage) to a two-storey, 3 bedroom stylish apartment. 

As mentioned above, the cost of building a granny flat can vary significantly – in fact , prices can start as low as $10,000 or go up to $200,000 and over. 

Here are the most important factors that impact granny flat prices.

1. Custom-built vs granny flat kit homes

Custom-made granny flats are built from scratch directly on your property and as the name implies they are fully customisable. In other words, you can determine the floor plan, fixtures and finishes—everything from the size down to the colour of the front door. You might even add a garage or a double carport next to the building, although this might set you back a few thousand dollars more. Custom-built granny flats can start from $50,000 and go up to $200,000 or even $250k. 

Granny flat kit homes, on the other hand, are pre-built. They are available in different styles and can be delivered straight to your property. Kit homes tend to be cheaper than custom jobs—you can find the cheapest granny flat among pre-built constructions for $16,000, although keep in mind that there may be some hidden costs involved. 

Most kit home quotes include the cost of plumbing, electricity connection and foundation construction (i.e. concrete slab), while others may come with: 

  • A full kitchen with laminate countertops
  • Light fixtures
  • 10 power points or less (including one external power point)
  • Bathroom hardware and fittings
  • Flooring
  • Standard cladding.

However, more often than not, the price does not include council fees or specific finishes (such as letter boxes, blinds, and flooring). Upgrades also cost extra—for example, adding a brick veneer can go as high as $8,400 extra, while timber weatherboard cladding will set you back $4,500.

All of these expenses could add up to the final cost and make the price of a kit home more or less the same as a cheaper custom-built granny flat.

2. Size

The second most significant factor determining the granny flats’ building cost is the size of the structure. 

Let’s break down the cost by size. 

How much does a one-bedroom granny flat cost?

The cost for a one-bedroom granny flat (around 36m2) is between $120,000 and $140,000 (including site costs, design, council approvals, the contractor’s fee and standard inclusions and finishes). That said, you can find a low-range granny flat from a kit home builder for $81,000 (that comes with plumbing, electricity and concrete slab).

How much does a two-bedroom granny flat cost? 

Building a two-bedder granny flat in Australia (of about 60m²) will require an investment between $145,000 and $155,000 for a turnkey, move-in ready dwelling. A kit on the other hand would cost about $95,000 with plumbing and electricity connections included. 

How much does a three-bedroom granny flat cost?

Factoring in all the expenses, constructing a three-bedroom granny flat in Australia costs $145,000 to $160,000, while a prefab 71m² granny flat kit is available from $120,000 (with slab and utilities included).  

How much does it cost to build a two-storey granny flat?

If you have a bigger block of land, you could build a two-storey deluxe granny flat (provided your council allows it). As expected, these are the most expensive on the granny flats price list with costs ranging between $215,000 and $280,000.

3. Site costs 

If there is excavation and levelling of the ground involved, expect to pay more. Likewise, if your property is on a sloping site or in an area prone to floods, it will cost you more as you will have to set up joists and bearers rather than just a cement slab. 

On top of that, you will need to pay around $1,200 for a surveyor’s report—a surveyor will map out the construction site and draft a plan to present to the council for approval.

You would also need to prepare the site for construction which may include removing trees (you would need an arborist report as well) or knocking down an old garage or other structures—this may not be as expensive as demolishing a house, but can still add to the final bill. 

4. Design

The cost of design depends on the floor plan and the finishes you want added, although it tends to average at about $10k. Your architect can help you design the most functional layout for your property, but keep in mind that costs can add up as you include high-end finishes, expensive materials or non-standard floor plans. For instance, adding a kitchen to a granny flat can add another $10,000 to the final tally. 

5. Material 

The cost of raw materials alone can amount to $80k+ for a 60m2 granny flat, which includes the frame (timber or steel) as well as cladding, roofing, internal walls, structural support and insulation. Furnishing and fixtures cost extra—the combined cost of components like doors, windows, lights, bathroom and kitchen hardware can go up to $25,000 (not counting appliances). 

6. Council approvals

There is more to building a granny flat than the cost of construction. When it comes to granny flats’ plans and prices, expect to pay around $10,000 to $15,000 for plans and council fees, although these vary depending on where the property is located. 

Do I need council approval to build a granny flat?

Whether council approval is required depends on the state or territory you are living in. In some areas, you can build a granny flat on your land without approval if the building meets specific criteria. In general, most states and territories require the following:

  • The granny flat shouldn’t exceed 60m2 (except in the ACT where granny flats can be as big as 90m²)
  • One granny flat is allowed per property
  • The lot width should be minimum of 12 metres
  • The standard block size should range between 450m2 and 900m2
  • The granny flat shouldn’t take more than 50% of the total block size
  • Site drainage is required according to the council’s storm and water policies
  • Additional conditions apply if the property is in a region prone to bushfires and floods or is in a heritage area.

Note: Some states and territories will not allow you to lease the granny flat to non-family members. Even though rules have become more flexible lately, you need to look into restrictions like these, especially if you want to use the building for rental income. 

Do you have to pay capital gains tax on a granny flat?

According to the ATO regulations, if you have a written granny flat agreement, you may be exempt from paying Capital Gains Tax. However, you need to meet some conditions, such as having an eligible individual occupy the property for life without paying you rent. Tax matters are complex, so it is best to talk to a financial advisor or accountant who can advise you on the best ways to avoid paying CGT. 

How to Pay for the Cost of Building a Granny Flat?

Several financing options are available for those looking to build a granny flat. 

Savings

If you have enough funds, using your savings is the best way to finance the construction of a granny flat on your property. It also means you won’t have to take out a loan and incur high interest charges. However, it’s important to ensure that you have enough to cover the entire project before getting started or you could end up in financial trouble. 

Government grants

Occasionally, Australian state governments offer financial support for the construction of granny flats. For instance, at the beginning of 2022, the Tasmanian government offered Ancillary Dwelling Grants of $10,000, so it pays to check your government’s official site for any ongoing initiatives helping cover the cost of granny flats.

Credit card

Although it is unlikely that you can cover the entire granny flat cost, you can perhaps pay for some components of the additional dwelling with a credit card. Before you do so, ensure you can repay the accumulated debt on time because credit cards usually have higher interest rates than home or personal loans. 

Personal loan 

Another option you might want to consider is getting a personal loan.  If you’re interested in taking out a personal loan to finance your granny flat project, compare offers from multiple lenders to find the best deal, but keep in mind that the average interest rate is 14,41%, much higher than a home loan. 

Offset home loan account

You can also cover the granny flats building cost by redrawing from your home loan or using your mortgage offset account. Note that not every home loan has these features, and consider the long-term implications on your mortgage if you utilise the offset account or make a redraw.

Can I build a granny flat by myself?

You can, but it is not advisable unless you have some experience in construction. According to DIY Granny Flat, a two-bedroom granny flat can cost $91,000 for an owner-builder. Considering that the average cost for the same structure is around $140,000, you certainly would save a lot of money. However, keep in mind that you would still need to pay for materials, council approvals, plans and connections to services such as water, electricity and internet. 

Further reading: What happens to redraw when a loan is paid off?

Bottom Line: Is Building a Granny Flat Worth the Cost?

Whether you want a separate place for your teenagers, an extra space for elderly family members or a rental unit, building a granny flat is definitely worth considering, especially with house prices soaring. 

For one, a granny flat is much cheaper than building a standalone property, both as an investment opportunity or for your own use. 

On top of that, a granny flat can bring in around $14,000 in rental income a year. In fact, those renting out the building can expect a 10-20% return on investment, which means that the granny flat will basically pay for itself.

Lastly, adding a granny flat to the property can increase its value by almost 30%. 

That said, before you start construction, make sure you are familiar with all the costs and risks involved, Carefully budget for the project and make sure you set some money aside for unplanned expenses. 

1. How to choose a granny flat builder?

Choosing the right builder to turn the granny flat plans into reality is essential. To find the best one you could get recommendations from friends and family or search the internet for builders. Either way, you need to make sure that they have appropriate building licences, references from previous clients and transparent pricing. 

2. Can I build a granny flat on my property?

Most properties can add a granny flat extension, although to be absolutely sure you need to contact the building and planning department within your local council. 

3. What is the cheapest granny flat?

Kit builder granny flats are a cheaper alternative to customised structures. Actually, a prefab granny flat can cost $16,000 or less, whereas the cost of a custom-built structure can go up to $200k and more. 

4. How much is it to build a granny flat in Sydney?

Constructing a granny flat in Sydney can cost you from $50,000 to more than $120,000 depending on the size, the land you are building on, materials, labour and other factors. As a reference, Cubitt’s granny flats in Sydney with one bedroom can cost from $120,000 to $140,000.

5. How much does a granny flat cost in WA?

A one-bedroom granny flat cost in Western Australia can start from $50,000, while the average price for building a granny flat is between $100,000 and $120,000

6. How much do granny flats cost in Brisbane?

Granny flat construction expenses in Brisbane are between $50,000 and $200,000 for building a granny flat on your land as a secondary dwelling.

7. How long does a granny flat take to build?

The entire process should take one month to a year, depending on the design, the land and whether or not you will have to deal with a distruption in the supply chain. 

8. How much is a granny flat in Victoria?

The average price of building a granny flat in Melbourne is between $140,000 and $190,000, although this varies according to the size of the structure and materials used.