Forget the fancy deck or the new landscaping – Australian homeowners are now looking at their backyards as prime real estate for a different kind of upgrade: the granny flat.
The growing trend is driving a massive surge in renovation loans, with new NAB data revealing a 21 per cent jump in 2025, outstripping growth from the previous two years.
The backyard boom has even caught the eye of hardware giant Bunnings, which has entered the housing market by selling flatpack ‘pod’ homes.
These affordable options, starting from just $26,100 for a DIY studio and $42,900 for a larger granny flat, have quickly become one of Bunnings’ most searched items.
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The impact on manufacturers like Elsewhere Pods has been immediate and staggering. Founder Matt Decarne reports a monumental leap from 10 to 15 inquiries a day to over 500 calls daily since their national partnership with Bunnings launched, with a phone call inquiry now coming in every 48 seconds.
“Australians are searching for smarter, faster and more affordable housing solutions,” Mr Decarne noted, highlighting the shift towards backyard studios, granny flats, and even full-time residences.
Modular flatpack builds are projected to grow by around 7 per cent a year to hit $18 billion by 2030. Source: Elsewhere Pods
NAB data confirms a significant increase in searches for “granny flat” on property platforms, particularly in Sydney and Perth, as individuals seek practical ways to support family, generate a second income, or plan for future needs.
Meanwhile, The Housing Industry Association projects a tenfold increase in granny flat builds by 2026 compared to four years ago, underscoring their growing importance in the housing landscape.
Tasmania is at the forefront of this movement, with proposed amendments to its planning scheme set to increase the maximum size for a granny flat from 60 square metres to a more substantial 90 square metres.
Bunnings sells pod-style homes for just $26,100, along with larger granny flats for $42,900.
“We need to be coming at housing from all angles,” Tasmania’s Minister for Housing and Planning, Kerry Vincent said.
“There is significant demand for one-and two-bedroom homes across the state, and we need to make it easier to deliver this type of accommodation.
“Having a small, self-contained dwelling located on existing blocks represents low-hanging fruit as we look to increase our medium-density housing stock.
“By expanding this size, we can create more diverse housing stock, giving Tasmanians greater options for where they can live.”
NAB Executive Denton Pugh observes that the national shift reflects a broader change in how Australians view homeownership.
“People want their homes to work harder for them,” Mr Pugh said.
“With affordability still tough and rental demand rising, adding a secondary dwelling is becoming a smart, practical option. It gives homeowners extra space without stretching into a much bigger mortgage or taking on the cost of moving.
Matt Decarne founder of Elsewhere Pods that have been inundated with requests since partnering with Bunnings.
He adds that well-designed granny flats are becoming a long-term investment, strengthening property value and offering flexibility for life’s changes, whether it’s housing ageing parents, adult children, or generating rental income.
“Granny flats can give people the room they need as life changes, or generate steady rental income. More and more, they’re becoming a long-term investment that strengthens the value of the property,” he said.
For NAB customer Haydan Andrews, building a granny flat on his Newcastle block was a strategic decision.
Initially considering a full redevelopment, the 25-year-old quickly realised the prohibitive costs.
“Switching to a granny flat just made more sense,” Mr Andrews recounts.
“The numbers stacked up straight away – lower build cost, quicker turnaround, and rental demand in Newcastle is strong.”
NAB customer Haydan Andrews. Pic: Supplied
He kept his original front house and built a new granny flat in the backyard, creating two separate living spaces.
He also meticulously designed the granny flat to ensure privacy and a sense of independence for future tenants.
“I didn’t want tenants feeling like they were stuck in someone’s backyard with zero privacy. So I designed it to feel like its own little place,” he explains.
Ultimately, the project was about creating options: “Whether I keep the place or sell it later, the granny flat gives me options, and that’s the whole point.”
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