By Rich Harvey, CEO & Founder, propertybuyer.com.au
Key points
- The Queensland government has intervened to attempt to assist with the rental crisis by allowing new and existing secondary dwellings to be rented out to unrelated parties.
- This change opens major opportunity for both capital growth and positive cashflow property for the short term, for existing home owners and property investors who purchase or own compliant dwellings.
- Local government areas in QLD that permit secondary dwellings have had this benefit eventually priced into their housing. In Brisbane and other LGA’s in South East Queensland it may take up to 12 months to have this priced in by the market.
An amendment in Queensland to the Planning Regulation came into effect on Monday 26 September 2022.
To provide people with more access to housing options, restrictions on who can live in secondary dwellings will no longer apply across Queensland and will enable homeowners to rent out secondary dwellings, such as granny flats, to anyone.
This amendment removes the restriction of how members of a household live together. This recognises that the relationships of occupants in a dwelling and how they interact with one another should not be considered in a planning assessment of how land is used.
Why did this planning change occur?
The Southeast Queensland rental market has the most chronic shortage in the country.
The crisis in accommodation sees thousands of people with perfect rental histories couch surfing, camping, living in caravan parks, competing with scores of applicants on every home.
An approximate 75,000 population increase in Queensland annually, consisting of interstate migration and natural increase, puts pressure on the housing market like nowhere else in Australia.
An increase in the cap inbinternational migration band the opening of borders will exacerbate further the supply and demand for housing.
What cripples housing further in Queensland is the now uncertain building industry. People are genuinely fearful of purchasing an off the plan apartment or enacting a construction loan knowing the risk and uncertainty.. Queensland needs housing like no other place in Australia and to make things worse, supply wise - the rug has just been pulled out.
Home buyers and investors are telling us they don’t want to risk building new homes unless they were already committed, or unless they are building in areas with clear profit margin.
Regardless of a builder’s financial position or balance sheet, if they can't secure new work because of the uncertainty, it actually creates the uncertain circumstances feared and the danger becomes a self-perpetuating prophecy.
Land developers are finding it more difficult to sell land, as are apartment and townhouse developers selling dwellings. Competitive funding is harder to find and feasibilities are not stacking with the growth in pricing, construction costs and holding costs collectively. Some areas are still growing in value and those developers holding land have increased valuations on balance sheet - which accounting wise has mitigated ongoing cost input increases These developments generally need to be sold however and that is where the issue will lie, in practically achieving their realisation.
There will not be the same volume of developers or developments moving into the market in the short term, which creates a further problem downstream and this monumental problem is not a quick problem to solve. Migration will keep occurring though and the federal government has opened the fire hose on new migrants entering Australia.
In Queensland, demand will never catch up to the need or required supply of housing for the foreseeable future and that is one reason many of the smartest minds in the country see Brisbane property as future proof on that basis alone.
With some forecasts between 10 and 20 percent for increases in median rents in the next 12 months, it is heady times for property investor but still an ongoing crisis for those not in the housing market in Queensland.
This planning change will not solve or alleviate our housing crisis in any way.It is just one easy thing the Queensland Government with a stroke of a pen can do. It is like pouring a bucket of water into a desert...but for property purchasers, we still want to be under that bucket.
Therefore, this further opportunity to increase cashflows dramatically - without it being priced in to purchases for the short term - has now been gifted to the educated.
The Previous Status Quo
Many areas such as Brisbane restricted secondary dwellings to be rented only to related parties and this restricted the opportunity for higher yields on investments, or additional income for owner occupiers. Areas like Logan city and Ipswich LGAs permitted secondary dwellings previously and these have proved popular for both investors and tenants.
Glen Sainsbury, Principal Buyers Advocate for Propertybuyer in South-east Queensland, notes that Brisbane has the highest rents in metropolitan Queensland yet similar build costs for secondary dwellings to Logan and Ipswich, which is supercharging returns for investors chasing positive cashflow property. Sainsbury said the penny hasn't dropped in Brisbane, or in other parts of Queensland yet - nor will it for the short term.
What the Planning Changes will mean
1. For Existing ownersThe ability to build a secondary dwelling.
Any new secondary dwelling will be able to be rented to anyone, regardless of whether they are related to the occupants of the primary dwelling. This means more options for renters and provides the opportunity for owners to receive additional income from renting their secondary dwelling. For any new secondary dwelling, you will still need to speak with your council to understand if you need development approval for a secondary dwelling as this has not changed. Any new secondary dwelling will still require building approval.
2. For New PurchasersBuying a secondary dwelling compliant property may be an extremely lucrative exercise for the short term. Some 2-bedroom properties can rent for as much as $550 currently per week in the Brisbane LGA.
Rents are forecast to rise by an unprecedented level in the next 12 months. Already strong yields can be supercharged if there is an existing secondary dwelling or compliant dual living property currently rented to related parties only. New secondary dwellings can be constructed and rented independently - and are permitted where previously they were not.
Rents for Brisbane granny flats can fetch as much as $550 per week in rental income. No matter the increase in building cost, a small secondary dwelling will be a positive cash cow and the gift that perpetually gives for those who choose to enact it.
Those homes that comply for construction of, or already benefit from a secondary dwelling are expected to attract a new premium on pricing within the next 12 months.
Precedents and what adjacent LGAs that permit secondary dwellings shows us
The early adopters, who understood the benefits when LGAs such as Logan permitted secondary dwellings made windfalls. Once local agents in these areas understood and embraced secondary dwellings, once the general public became awareand the penny dropped, people started exclusively buying them for their returns. The gap in homes that have just 2 sqm of land difference or that have capacity to a build a secondary dwelling with driveway access can be incredible.
With yields on secondary dwellings rising as strong, sometimes stronger than the primary dwelling (being at a more affordable end of the rental market) these benefits and yields are now priced in to the property. They are advertised as such by agents and factored into the purchase prices of those properties in these permitting LGAs and have been for many years.
This is where we are right now in Brisbane, they are not yet priced in. But we warned...you need to know what constitutes a compliant property.
Moving Forward
Agents need to understand these changes and what it means for a property now with value add, granny flat or higher yield potential. Just like with the lag we saw in pricing for places like Logan when they first permitted these dwellings, this same lag will occur in other Queensland LGA’s like Brisbane, which can be exploited by the market savvy. I have seen compliant properties marketed and sold in the last month in Brisbane with not a mention of that compliant property’s new potential. The educated or those with trusted advisors supporting them will get another reason to smile in one of Australia's strongest long term property markets.
To find out how to take advantage of a planning change with a small window of opportunity to supercharge your returns with Brisbane granny flats, speak to our expert team at Propertybuyer, Australia's Most Awarded Buyers Agents.
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