This week we chat about Tasmania's Ancillary Dwellings Grant Program that applications have just opened up on... The boys discuss how this may be an answer for the Housing Shortage that is currently affecting the Hobart Marketplace.

Transcript of Granny Flat Grant

Episode: | EP86
Show Title: | Granny Flat Grant
Cast: | Aaron Horne, Patrick Berry & John McGregor
Show Length: | 25 minutes 48 seconds

John: To build that granny flat, it actually quite... it could be potentially a very good financial move for a client, so the numbers stack up for sure.

Going once... going twice... SOLD! You're listening to The Property Pod!

Aaron: Okay, guys. Welcome back to The Property Pod, your weekly engagement into real estate here in the Hobart marketplace--I'm getting so good at this intro--my name is Aaron Horne. 

Patrick: I'm so glad you went there, because... [laughter]

Aaron: Absolutely! Yeah, thank you so much! Welcome back to The Property Pod. I'm your host, Aaron Horne, and I'm joined…

John: ... and he is crushing it [laughter]

Aaron: I'm on fire this morning, guys. It was freezing this morning, so when I woke up this morning to my son, I put on the "Hello, Google" and it said, "Welcome, Good Morning! It's minus one." You gotta love a minus one morning here in this brisk brisk state of Tasmania.

Patrick: It's so cold when I left home this morning. I got rid of the ice off the car with the old bucket of water, and started driving down Crosby road. Had to pull back over because the water had re-frozen [laughter] onto the front of the glass and then Parker and I had to drive back with no vision to get more water.

Aaron: I was doing the "Ace Ventura head out the window" trick, you know he drives with his head out of the window, yeah, so I was doing that one because I only have to cross two streets [laughter] I probably shouldn't say that in the company car [laughter] that I was driving somewhat, I'm...  

Patrick: Insurance claim... [laughter]

Aaron: No, the mercury dropped very very low but, Pat... well Pat, you're meant to be on the warmer side of the country.

Patrick: I was supposed to be in Queensland but here I am with you, boys, instead

John: Well, you're welcome! [laughter]

Patrick: Not sure if that's a good thing or not, but hey, I'll take it 

Aaron: Look, I think one positive of it was: you would have missed your daughter's dance recital this morning at the Stedeford's, had you been in Queensland…

John: Oh yeah

Patrick: That's true. [Aaron: you got to get there this morning...] instead, I got to watch dancing for a couple hours, but hey…

Aaron: Mate, you were beaming when you came back and you said that... 

Patrick: It was pretty funny [Aaron agrees] like, I don't think it was supposed to be funny, but it was. Kids are funny. 

John: I watched that movie "Little Miss Sunshine", a couple of nights ago and that great scene where you find out that the whole dance scene that her grandfather taught it was just an absolute abomination. I just... I love that scene, so you just made the whole... I'd love to go to a dance result or something like that where that happens.

Aaron: Well, it's not the same; it's in the movie, but you were describing a young girl who maybe just danced to the beat of her own drum...

Patrick: ...on stage and it didn't matter what everyone else was doing, she was going to do…

John: I love that! [laughter]

Patrick: That's very good [laughter]

Aaron: All right, let's jump into some real estate stuff today. We've got to get into it;

We've got a little bit to talk about. First up, there's this realestate.com report that's come out that... it's not quite in our realm, but it's in the rental realm of things you want to cover off on this, John?

John: So I think what's describing is that the amount of views that's coming through the website for rental properties in Tasmania has just again continued to increase so…

Patrick: Yeah, crazy. I think they were saying 2,600 views per listing. 

John: Yeah, that's amazing!

Patrick: It's just silly [John agrees] like that's just unbelievable…

Aaron: I can't even fathom that that many people are looking at rental listings like here, there, and everywhere to just try…

Patrick: And there appears to be a lot of tenants moving around a moment. We've had a few lease breaks take place at the moment and I follow a couple of Facebook pages like rental towers and a few others, and there's a lot of people that seem to be just finishing up in a lease where they're at and and moving into something else [John: moving sideways] yeah and I don't know if they're doing that to try get a cheaper rent or if they're doing it because it doesn't fit their needs anymore, but yeah, just a bit of movement around at the moment, but the market's still really strong. This shows that--like 2,600 views per property. That's a lot of people...

John: 100 percent! When that's just like straight activity and more so to that, it's unlikely where you'll have, say in a real estate--in a sales transaction, you just got a lot of people sticky baking. It's not as common we find that you're going to be sticky peeking just at other rental properties.

Aaron: Yes, that seems more like out of necessity than out of kind of: "I just want to have a window shop through what could potentially be"

John: Yeah yeah, exactly right…

Patrick: Yeah, but this stat here: it's the highest number in Australia. So, out of all of the entire country, people looking here the most for rentals. But it's up by 72.4%.

John: That's insane! 

Patrick: It just shows how many people are seeing Tasmania as an option and maybe, they can't buy at the moment, so they have to rent because they move back to the state and there's no stock for sale like there's a heap of different reasons why maybe the rental market is still just booming along.

Aaron: I think out of this report as well, it had something to do with Hobart being again top three cities and it's still seen affordable as from the mainland perspective--from the perspective of I can afford to look into that market. [John agrees] Again, we're in that position where there's not a lot of stock on available.

John: Well, and it just goes by me virtue of not enough property for people wanting to move here. What are you going to do? Like, we, many years ago, we used to have a really good... we used to track our own internal stats at the office to go our vacant properties versus the greater market and it was amazing to see where at one point, there was let's just say in one week there was 820 rental properties available and then, two years later, there was like 150 so, the available property based on the popularity had just [Aaron: dropped off a cliff] ...dropped off a cliff. Just nothing available…

Aaron: And so this has got to do with like population growth and kind of people coming back to our beautiful state.

John: ...bringing, you know, coming home…

Aaron: What we've got here to talk about today is actually something we've kind of covered off before, is that kind of medium density housing or trying to fix the issues of there not being enough properties for people to move into. There's been this promise of this grant that's been coming for quite some time and then with this recent election that's just been happening, they've been trying to work out kind of the ins and outs of how they would actually get this across the line. So, now that we are kind of in with the stable g-government... [Patrick: g-government...] Yeah, my words... [laughter]

Patrick: Now that we're translating this, Niño [laughter] 

Aaron: Now that we're in with a stable government, the Department of State Growth are now accepting applications for this [laughter]--how do you say this word?-- [John: ancillary] thank you very much! For granny flats. Let's just say the granny flat grant... [Patrick: granny flat grants] granny flat grants!

Patrick: I like it.

John: I think I've got wrong: it's ancillary not ancillary. Anyway... 

Patrick: It's all right, your brother will correct you later, mate.

John: Thanks, mate.

Aaron: Anyway, basically what this is kind of they are trying to get people to build a brand new granny flat in the back of their property if they've got the space…

Patrick: Which is awesome because it really does help ease pressure because the biggest problem we have is not enough land to develop new homes, [John: absolutely] so how do we utilize the land and the driveways and the infrastructure that's already there and sort of turn it into like more housing and I think this is a really good initiative.

Aaron: Yeah, so like a lot of places, you know, you'll see if you've

got the extra size on your block so you can pop that little unit in, but this is kind of a smaller version of it, so your one bedroom one bathroom kind of it has all the essential things that you need. I think one of the important things is it has to have power and water linked from the main house--you can't really kind of separate and stuff.

Patrick: Yeah, it's like I can't go and sell it at a later date. It's main difference between a granny flat and a strata unit. [Aaron: yeah, cool] So just always be part of the house, like just another living space in the house.

Aaron: Yeah, so this is a 2.5 million dollar grant program. It's part of the Tasmanian liberal government's First Hundred Day plan. It's one of the initiatives implemented to help boost housing supply, support home ownership, and put the downward pressure on the rent, so the stuff that we're just talking about it's kind of let's move people that are kind of in, so I think the really good idea of this is if your mum, your nan, your gran, somebody that is taking up a whole house with spare bedrooms that are in there that could be used. Move them into your backyard and have a keep an eye on them. 

John: Exactly! And that's that thing where you just have two people living in multiple bedroom properties that just don't need that much space, but they're really concerned because they have nowhere to go either and obviously, the family would in many cases the fam would love to help, but they don't have the capacity to help either. So, when you've got that element, we were simply having a discussion with one of our friends who remember growing up,  hanging around their house, and then was living at the granny flat out the back. And then once she passed, it became [Aaron: his little bachelor pad] his little bachelor pad and then his sister and brother-in-law are living there when they're building and then now, I think they lease that to another family.

Aaron: They leased that to a Nepalese family now, so actually I was saying earlier before that he's almost like the king of this little community in his area of Lennah Valley. They'll have special dinners for Steve Trippit, shout out to you out there, my man. I know you won't be listening... [laughter] don't know what a podcast is, but shout out to you, my man, the king of your little community down there with you already... you've had a granny flat for years and you've used it for the family for whatever reason has popped up so, again, it's another opportunity to create a space, so turn your three-bedroom house into a four-bedroom, two-bathroom, with separate living sort of thing.

John: Well we... I was having a conversation with one of our investors and they have a property in Bridgewater I think it is. Technically, it's just large enough to... if the house was positioned in a better spot, the potential to strata would be an option and she's long on that sub; she has no intention of ever selling, and I said, well look, unfortunately, with that options, just not--it just can't be done. However, if you were looking to try and add a little bit of extra income as a potential, maybe looking at this option is worthwhile. I think even if you... it's because what does it say, you can't build it; it can't be any bigger than 60 square meters, but that's plenty big enough for separate living bedroom, kitchen, laundry, 

Aaron: almost definitely, yeah.

John: More than enough space and worst case scenario, you've actually just got a really good addition to the house, anyway. All of a sudden, you end up with from three bedrooms to four bedrooms, two bathrooms, two living areas, it's actually a really good option that way, too.  

Patrick: Yeah, so we're looking at it from the perspective of moving family into your backyard or potentially making a rental opportunity, but there'd be families out there as well that have outgrown their current home, but can't quite afford to step up to the next level home, so build a teenager's bedroom and bathroom out the back.

Aaron: I'm not sure if that works with this grant, because I believe you've got to rent it out for two years post build... 

Patrick: So, you've got a kid that's almost ready to move out and you rent it out for two years first [laughter]

Aaron: You could play that if you've got a 15 year old that you think will eventually need it [laughter] or if that 15 year old needs he's working at Woolworth or Coles, or somewhere out there... Might have to sting them for rent for living at home.

John: Well, I mean, thinking back to our friend's example where obviously, they had because it was a new project, too, because well, with your situation, Aaron, where you've got a really good building at the back which would be perfect for it, but they won't allow... they won't give that ten thousand dollars, is that right?

Aaron: Yeah, so looking into this, the reason I kind of put this together with the show notes was this is something I've been looking into ever since it was announced. I've got a granny flat which we've mentioned on the show before, out the back, already there. It was in pretty average condition when we got it. It kind of felt like a bonus. There's the little back house out the back--that's the bonus. Since then, I've done a bit of work on it. I've kind of pulled down the walls, put some insulation in, just getting it ready to kind of be a playroom, a cottage for the family to come and stay in et cetera. When this idea came out, I was like, "ah, I'll jump on this!" So, I'm not sure if you've mentioned it already, it's a ten thousand dollar grant. So essentially…

John: If you invest 10, they'll match 10 kinds of things.

Aaron: Yeah, so that's the other part where I was looking into it. I probably can't afford to do all the stuff I'd like to, currently, to the place with my situation--it is what it is, but I've just been tinkering away, so I looked into this thinking like, "oh, this could be a good opportunity" [John agrees] One thing that is coming out of the grant that I've read in is that it must be a new build; it can't be a a pre-existing one.

John: That's unfortunate.

Patrick: And it's got to be at least twenty thousand dollar built

Aaron: and it's got a, yes. So essentially, what it ends up being is if you're willing to put ten in, there'll be ten coming back at you in the grant sort of thing, so not as much as I was looking to spend on my place, but a really good opportunity for people out there that are looking for something like this and if you've got that 10 grand, you could then obviously use the rent to kind of offset that cost [John: yeah, definitely] in the future.

John: And in many ways, it's probably going to cost you a bit more than that. However, if you do have that separate rental property, in our areas, you could say... could any it be anywhere from 250 to 500 dollars a week depending upon the finishing and the location. The build cost of a 60 square meter separate dwelling--will be more than covered in positive rent growth over the long term, so I mean, why this is great too is unless they change, obviously, all the zoning laws which mean god knows how long that would ever take. This is a really good solution for people who want to create an extra income in their house…

Patrick: Especially if they've got yards they're not using

John: Yeah, exactly. To me, I remember looking at this, years ago, and there was obviously, this is just anecdotal for me talking but, it saw that huge change in Melbourne and Sydney where they started to do this really really commonly and it's just surprising why it's just never taken off in Tassie.

Aaron: Well, it's kind of what they were talking about in the Glenorchy City plan of kind of changing the mindset from you have your house with your big block out the back like the living situation in the future is, you know, there won't be as much space, so let's kind of maximize what we've got and use it better and have all the community areas that you can go to.

John: Well, I had this thought where it reminds me if everyone had a vegetable garden at the front of their house. There'd be like so much food that we couldn't even... we couldn't eat it all. It's that so fortunate enough if we start to consider all these large backyards that can be segmented off over time. There's a real good potential that we do have an abundance of housing or that will at least meet the requirements of what we need by everyone, you could say is pitching in their own way.

Aaron: Yeah, most definitely. It's kind of getting that community together and

it's funny when you said that. I've been walking the dog just up my street--this is off topic--but walking the dog up my street and there's this bit of looks like lettuce growing in the gutter and every time i walk past, I point out to my son, "oh look there's the street lettuce, son, if you ever get hungry, you just come along and eat the street lettuce" and then that led us down this ridiculous part of talking about: imagine if that was a thing where like all your veggies just grew in the gutters of the street... [laughter] just go along and eat your strawberries off the side of the road; it was like mugging on a carrot. Patches thinking you're crazy you say this stuff to your son. [laughter] 

John: I like going down these, you know...

Aaron: There's a mark of the straight lettuce pad I'm telling you. [Patrick agrees] [laughter] sounds like it.

John: There's certainly to demand…

Patrick: Is that before or after you walk to Woolworths with the free fruits? [laughter]

Aaron: He loves those nanas; he goes into coals and when they don't have them, he's like "nana, nana" I'm like, "nah, wrong store, buddy" [laughter]

Aaron: No, so back to the houses. The way the grant looks like it's going to be paid out is it'll be paid out in two installments, so five thousand dollar installments. You get the first five thousand when you submit a statutory declaration of building commencement and then any relevant council permits within six months of signing the deed. 

Patrick: Once it's all signed off and finished…

Aaron: Is that what that means?

Patrick: I'm pretty sure that's what that's referring to that once it's installed and you get the sign off and it's approved, then that's for the half…

Aaron: And so then, the second installment is when you receive a significant of occupancy and assigned lease. 

Patrick: That's an extra little bit there…

Aaron: ...little caveat 

Patrick: Yeah, so you've got to actually find your tenant and get the tenant in there before they'll pay that. 

Aaron: Well, I guess yeah, you can't promise to say I'm going to build this and rent it out, we'll give you the cash if you can't prove that you're then renting it out.

Patrick: And that's why it takes them forever to think of like to get these policies into play, because they've got to think of every little scenario, I wouldn't have thought that you'd have to have a lease sign before you get the other half of your grant. I guess that makes sense.

John: Yeah, well that's the thing. Is it the... obviously, they're trying to specifically fix the problem and they don't want a case where everyone's just getting money to build another separate living area at the back, fair enough. Well, I mean playing the numbers, though, I mean Ijust did a quick calculation on what a... how much it might cost to build anywhere from say 100 to 150 000 dollars and on a fair rent. If you establish that and put in the lease in place, it's probably looking at you would expect at least 10% return on that build for what you could rent it for. It's probably more; it might be a bit less, but most likely, more.

Aaron: Is that your estimate on how much building a 60 square foot?

John: Well, so I said, 160 square meters times at least two to two and a half thousand dollars for a build square at the minute and then doing an average rent of say 300 to 350 dollars a week for that in the right area, 300 bucks a week would seem fair, and then obviously, working out the rental yield. That's a return of 10%, so that's a bloody good return considering that most rental properties in Hobart now are shifting towards this sort of four to five percent and if you look in metropolitan Sydney and Melbourne like it's only like one and a half to two percent. To build that granny flat, it actually quite... it could be potentially a very good financial move for a client, so the numbers stack up for sure.

Aaron: So, speaking of numbers, I think the only other thing we haven't covered off basically on the grant is that it is available for the first 250 people [John: specifically] yeah, so the first 250 eligible applicants. It opened on the 30th of June, just before the start of the new financial year, and closes on the 30th of September or until they're fully subscribed and I think it says here that you'll hear back within 21 days of submitting your application, whether it's a go or not a go.

John: Well, I think these grants are really useful... it obviously, it might be 10% of your build, but why not take advantage of it if you were thinking about making that move anyway? It's like, why not? It's like an element where fortunately enough, you're just gonna get a little bit more bang for your buck.

Aaron: Sorry, I wasn't listening. The computer was... I was exploding on me.

John: I thought i was gonna finish my sentence early, but then you guys kept... [laughter]

John: If the grants are available and you were thinking about doing it anyway, now's a good opportunity to start making that next step, why not?

Aaron: Yeah for sure, look and it was something I'd looked into. I was really interested in... I'm still really interested in the outcome of it looking into the future and if we can help anybody out there that's living rough or needs a place to stay, this could be something to look forward to in the future and hopefully, give you an opportunity to have a place to stay or have a bit of security with a nice little granny flat and moving in with mum, nan, granny, any of those ones out the back. Imagine if podcast nan lived out the back of my place, [John: perfect!] I'd be here in the podcast blaring in my little granny flat out at the back and "man, turn that bloody thing down" [laughter] here John, just saying... "well, essentially" [laughter] "fundamentally"

John: That's a high quality problem as far as I'm concerned.

Patrick: Another thing that came out this week that caught my eye and it was quite interesting was actually a report that CoreLogic put out at the end of financial year. Did you see that one, John? 

John: Not specifically, no.

Patrick: Ah it's quite interesting. It was talking about how Hobart's one of the fastest growing cities in Australia.

Aaron: Yeah, this is what I was covering off before. I think I must have read Niño's thing, yep, anyway, hit us with it.

Patrick: On board?

Aaron: On board, I know what you're talking about.

Patrick: Yeah basically, Hobart's grown by almost 20% in the last 12 months which is just a huge number. I think the exact number is 19.6, so you buy a house last year for 400 imagine adding nearly 20% 80 grand, straight onto the top of it in 12 months. [John: unbelievable] It just really showcases what the Tasmanian marketplace and especially the Hobart marketplace is doing right. And the other thing that amazed me was only second to Darwin in the entire country, so to think that Hobart's marketplace is one of the fastest growing, like it's nothing our listeners probably haven't heard of before, well we bang on about it all the time about how hard it is to buy here in Hobart...\

Patrick: But, it's just like looking at it here, it's saying that Hobart dwellings houses and units combined have a higher median in Brisbane, Adelaide, Perth, and Darwin. 

John: Yeah, because what does it goes like go Sydney, Melbourne, Canberra, Hobart... 

Aaron: Like if you just said that five years ago, people would have laughed at you like laughs that we're the little under…

Patrick: And then to follow on from that, it's only about $145 000 more affordable than Melbourne and Melbourne is like one of Australia's largest cities.

Aaron: It's like a mega global, [Patrick agrees] that's nuts!

Patrick: Yeah, so Hobart is like etching closer and closer to Melbourne marketplace which off the show I just don't understand how that's possible. We're like little tiny island town, they're a big giant worldwide famous city you tell people overseas, you're from Hobart and they look at you, you say maybe you say Melbourne or Sydney and they know straight away. [John: exactly] We're almost as expensive to live here as it is there. [Aaron: awesome] It's just crazy. 

Aaron: Well... oh yes, I'm just saying like this is where i read up before so this is Mandy Welling who we had on the show in the past and you've got a really good relationship with John, president of the REIT, was saying that despite our price growth, people from interstate still see Tasmania as affordable. 

John: Relative value, absolutely.

Aaron: So yeah, this is what I crossed off on, she's the enquirer from interstate is increasing and we're hearing more anecdotes where people are coming here and putting their best foot forward so…

Patrick: a.k.a. putting in a big giant price to try to secure a property, because someone moving back from the mainland buying a house which is $145 000 cheaper than what they've probably just sold their place, if they're moving long term, they can afford to put maybe 30 or 40 000 dollars more than what it should be worth to try to secure it, so they can just take that property out of the market and that's going to anger local people they're not going to be happy to hear it, [John: it happened] unfortunately.

John: Well and that was where we looked at the numbers once before is, it does happen, 10% of the time, so is that there was like 10% was interstate or interest rate purchasing yeah where still most 90% of the market was grown by locals, so sometimes, the best buyers, nine times out of ten, have been locals but you will get those moments and we were doing an assessment for like a multi development actually in Moonah and there was a sale they were looking at once before at Garden Road and at the time when the sale had gone up, they said there were offers over like 770 I think it was, and then boom, the best buy came from interstate cash 910 grand and just everyone, "where the hell did this come from?" and of course, a lot of the locals like, "oh, this is great. This is boosted by price up" and then we had to go well, yes maybe in this particular unique case, was one person who just went blew it out of the water and then it just completely changed the expectations for the suburb and speaking with friends that live in the area and other clients, that was a stand out at the moment and there's so many cases like that across all suburbs and little streets where they go, "oh my god! how did that happen?"

Patrick: So interesting. I guess I was just curious perfect time for a report like that to come out being and be interesting to see what the rest of 2021 brings.

John: Well and it's so interesting, too, like if we're giving advice to clients in 12 months, we're completely wrong. We're like 20% off the mark so we have to consider calling back our clients because otherwise, we look like idiots. 

Aaron: Speaking of people being completely wrong, but also being completely right. Did anyone read the Propertyology report from Simon the other day? Basically, just flexing his muscles saying... [laughter]

John: Remember what I was saying?

Aaron: Yeah, remember when everyone said doom and gloom 

Patrick: I was right and wrong... [comments and laughter]

Aaron: All right, I think what we'll do is we will finish up there just before we go, I'd like to check Pat's hand tremors whether he's... how are you feeling seven days into "Dry July"?

Patrick: It's harder than I thought it's gonna be, I'm not gonna lie [laughter]

Patrick: When you get to Saturday night and you're like, "huh, what do I do?" [John: oh no] 

Aaron: Well, surprisingly, I heard Chris was saying how he's feeling a lot fresher and better so yeah after the seven days.

Patrick: It hasn't worked for me because all I've done is replaced beer with sugar. I'm just drinking coke and I'm like, "this is not what I'm supposed to be doing" Me and my wife, Abbey, "I'm off to the gym, I'm after this" and I'm like "oh, come on"

John: Someone's got to hold the ford at home, buddy.

Patrick: Yeah, but you know what? It's only three weeks to go.

Aaron: You're on the countdown  [laughter]

Aaron: As I feel, your dad's actually doing really well…

Patrick: Overall, the team's doing really well. I think they're almost at a thousand dollars in raised money and we'll be adding another hundred dollars to that today with the sale Martin put across the board yesterday.

Aaron: Yeah, awesome. Very good news.

Patrick: It's good to see that the tally's going up; we'll see where we end up.

Aaron: Yeah, if you do want to reach out in the month of July, you can go to dryjuly.com and look up the 4one4 Property Co. clear heads or yeah, check out The Property Pod and we will pop some links there, but it's for a great cause. So yeah, shout out to everybody that's got on board so far. Really do appreciate it!

John: Yeah, definitely.

Aaron: Thanks again for listening to The Property Pod. We will see you next week!

John: All right.

Aaron: All right, partner! Keep on rolling, baby! It's the property part time 

You have been listening to The Property Pod, recorded and edited by 4one4 Media House in

conjunction with 4one4 Property Co. This podcast is general information only and the thoughts and views expressed are the opinion of our panel and listeners should always seek to use their own investigation into any topic we discussed to ensure they fully understand their own situation. It does not constitute and should not be relied on as purchasing, selling, financial, or investment advice or recommendations, expressed or implied, and it should not be used as an invitation to take up any agent or investment services. No investment decision or activity should be undertaken on the basis of this information without first seeking qualified and professional advice.