Consents are no longer needed to build a granny flat – but how much does it add to a property's value?
By Susan Edmunds of RNZ
The rule change took effect last week, updating the Building Act and adding a new national direction under the Resource Management Act.
These remove the need for a building consent and a resource consent for small standalone dwellings up to 70 square metres in size.
Associate finance minister Shane Jones said it could save up to $5650 in direct costs for people building a granny flat and speed up the process by up to 14 weeks.
Ed McKnight, economist at property investment firm Opes Partners, said a flat would add value to a property, but potentially not as much as other work might.
Plans to cut costs and rules for building have been welcomed as a way to reduce homelessness, but concerns are raised about quality control. (Source: 1News)
"They don't work like a bathroom renovation where you spend $10,000 and it increases the value of the house by $20,000, for example.
"Instead, a granny flat tends to add the value you spent on it. So broadly speaking if you spend $120,000 on a granny flat, it might increase the value of your property by around $120,000. That's because while you can add building, the main unit also misses out on that land."
But he said they would appeal to some investors.
"Property investors still often build granny flats or minor dwellings because you can get an extra rental return. You might rent the granny flat out for $500 a week, but it only cost $200,000 to build. That's a solid rental return on that extra spend. Because you already paid for the land. You don't need to buy it again.
"When it comes to selling the properties, a granny flat can limit who your potential buyers are. While some cultures tend to value multi-generational living, many other home buyers just want a single-family home. So the granny flat isn't a drawcard for all buyers."
Property investor Nick Gentle said the key for investors would be being able to rent the properties separately.
Property investment coach Steve Goodey said the rule change was helpful, but not as transformational as the Government might have made it seem.
"There are still massive costs with getting water and power connected and so I think it will be of somewhat limited value to most investors."
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