Granny Flats for Small Sites in Victoria | Small Second Dwelling Guide
- Swarup Dutta
- Aug 8
- 4 min read
If your backyard is too small for a second townhouse, a granny flat may be a more practical alternative.
In Victoria, a granny flat is generally called a small second dwelling. It is a self-contained residence of up to 60 square metres located on the same lot as an existing home. It must include a kitchen, bathroom and toilet.
Why choose a granny flat?
A conventional townhouse usually requires additional car parking and suitable vehicle access to the backyard. On a small block, this can create significant design challenges, including:
A driveway wide enough for vehicle access.
Space for car parking for both dwellings.
Vehicle manoeuvring and turning areas.
A small second dwelling does not require a formal car parking space under the Victorian planning framework. This may remove the need for a new driveway and allow more of the backyard to be used for the dwelling, courtyard and landscaping.
However, the site must still satisfy building, access, drainage, service and safety requirements.
Key granny flat requirements
A Victorian granny flat:
Must be no larger than 60 square metres.
Must be on the same lot as an existing lawful dwelling.
Must be self-contained.
Cannot be separately subdivided or sold from the main home.
Must not be connected to reticulated natural gas.
Requires a building permit.
May require a planning permit depending on the site and proposal.
A planning permit is required in some circumstances, including where the lot is under 300 square metres in a relevant residential zone or where overlays and other planning controls apply. A planning permit may also be required where the proposal does not meet the relevant requirements.
Check the title for a single-dwelling covenant
Before designing a granny flat, always obtain and review the property title.
A single dwelling covenant or restrictive covenant that limits the land to one dwelling will not allow a granny flat to be constructed. This restriction may apply even where the planning scheme would otherwise allow the small second dwelling or provide a planning permit exemption.
A restrictive covenant is a private legal restriction recorded on the title that controls how land can be used or developed. The Victorian Planning Authority gives “no more than one dwelling” as an example of a restrictive covenant.
If a covenant affects the property, specialist legal and planning advice is required. Depending on the wording and circumstances, it may be possible to seek its removal or variation through a planning permit process, an application to the Supreme Court of Victoria or a planning scheme amendment.
Is a granny flat better than a townhouse?
A granny flat may be suitable where:
The backyard is too small for a conventional townhouse.
A new driveway would consume too much land or cannot be provided.
Additional parking cannot be provided efficiently.
The owner wants extra accommodation or rental income.
The proposed dwelling can fit within the 60-square-metre limit.
The owner does not need to separately sell or subdivide the second dwelling.
A granny flat is not suitable for every property. The existing dwelling, lot dimensions, easements, overlays, drainage, setbacks, private open space and title restrictions must all be assessed.
A 60 sqm granny flat will accommodate one bedroom or two smaller bedrooms.
Indicative construction cost
A recent quick building estimate for a simple granny flat with basic finishes was in the range of $120,000 to $140,000, depending on the selected finishes and site conditions.
This should be treated as an initial guide only, as the final cost may change due to foundations, works to the existing dwelling, demolition, service connections, drainage, access, design requirements, planning and building permit documentation and approval fees. Published Victorian cost guides also indicate that small second dwelling prices can vary substantially depending on size and construction type.
Indicative rental return
A recent example of a completed granny flat in an outer Melbourne suburb, located close to local amenities, cost approximately $225,000 to construct. The owner was receiving $450 per week in rent, equivalent to approximately $23,400 in gross annual rental income and a gross rental yield of about 10.4% on the construction cost.
This is an indicative example only and does not represent a guaranteed return. The actual net return will depend on vacancy periods, property management fees, maintenance, insurance, rates, finance costs, tax and the final project cost.
Get a granny flat feasibility assessment
A preliminary feasibility assessment can confirm whether your property can accommodate a compliant small second dwelling and whether a planning permit is required.
The assessment should include:
A title and covenant review.
Planning zone and overlay checks.
Site measurements and building envelope analysis.
Parking and vehicle access assessment.
Preliminary floor plan and cost review.
If your land is too small for a second townhouse, a granny flat may provide a simpler and more efficient development solution—provided the planning, building and title requirements can be satisfied.
Contact us to assess your granny flat potential in Melbourne and Victoria.
Frequently asked questions
Does a granny flat require car parking in Victoria?
A small second dwelling does not require a formal car parking space, although other access and building requirements still apply.
Will a single dwelling covenant allow a granny flat?
No. A covenant restricting the property to one dwelling will prevent a granny flat from being built unless the restriction is lawfully removed or varied.
Can a granny flat be sold separately?
No. It must remain on the same title as the existing dwelling and cannot be separately subdivided or sold.
Is a building permit required?
Yes. A building permit is always required, even when a planning permit is not.
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