What our analysis shows
Analysis by Granny Flat Numbers, data as of 23 October 2026
- A standard 60 m² small second dwelling comes to $199,000 turnkey in Melbourne ($175,000–$222,500), $21k less than the same flat in Sydney. Regional Victoria: $169,500.
- The new 80 m² size costs about $253,500, or $2,725 for each extra m². The kitchen, bathroom and connections are already paid for, so the extra space costs less per m² than the first 60.
- At the same two-bedroom rent, the 80 m² flat takes 2.5–4.0 years longer to pay back than the 60 m² one in every council area we ran. The extra space pays only if it adds a bedroom or a use, such as housing a parent, that you would otherwise pay for.
- Victoria waives development and infrastructure contributions on small second dwellings. In NSW the same flat typically pays $5,000–9,000 to council.
Fastest payback in Victoria, 60 m² two-bedroom flat
- City of Melbourne9.3 years
- Merri-bek10.5 years
- Monash10.7 years
- Darebin10.9 years
- Whitehorse10.9 years
- Knox11.6 years
- Greater Bendigo12.1 years
- Greater Geelong12.4 years
After agent fees, insurance, maintenance and tax at 30%, no loan. Rents: Homes Victoria, median for new lettings by council area, September quarter 2025 (latest published).
What you pay for
| Line, 60 m² in Melbourne | Cost |
|---|---|
| Construction | $163,800 |
| Site preparation (flat, easy access) | $12,000 |
| Sewer, water, power and stormwater connections | $10,000 |
| Design, engineering and BASIX/energy report | $8,000 |
| Approval: Building permit only (no planning permit) | $5,000 |
| Total | $199,000 |
Melbourne build rates sit about 9% under Sydney's in the price lists we used, and there is no council contribution line. A building surveyor issues the building permit; when a planning permit is needed (lots under 300 m² or an overlay), it is usually a VicSmart application, decided in 10 business days.
| Size | Budget | Standard | Premium | Standard, regional |
|---|---|---|---|---|
| Studio, 35 m² | $120,000 | $139,000 | $170,500 | $120,500 |
| 1 bed, 45 m² | $138,500 | $161,500 | $199,500 | $139,000 |
| 2 bed, 60 m² | $169,000 | $199,000 | $248,000 | $169,500 |
| 2 bed, 70 m² | $191,000 | $226,000 | $283,500 | $191,500 |
| 2–3 bed, 80 m² | $213,500 | $253,500 | $319,000 | $214,000 |
Is 80 m² worth it?
Going from 60 to 80 m² adds $54,500 in our model. With the 60 m² limit gone, the question is what the extra room earns. If 80 m² only buys a bigger living area, rent rises little, because tenants pay by bedroom count. Here is the payback for both sizes at the same two-bedroom rent:
| Council area | 60 m² payback | 80 m² payback |
|---|---|---|
| City of Melbourne | 9.3 yrs | 11.8 yrs |
| Merri-bek | 10.5 yrs | 13.3 yrs |
| Monash | 10.7 yrs | 13.6 yrs |
| Darebin | 10.9 yrs | 13.8 yrs |
| Whitehorse | 10.9 yrs | 13.8 yrs |
| Knox | 11.6 yrs | 14.7 yrs |
| Greater Bendigo | 12.1 yrs | 15.2 yrs |
| Greater Geelong | 12.4 yrs | 15.6 yrs |
| Casey | 12.7 yrs | 16.1 yrs |
| Frankston | 12.7 yrs | 16.1 yrs |
| Whittlesea | 13.3 yrs | 16.8 yrs |
| Hume | 13.9 yrs | 17.5 yrs |
| Brimbank | 14.2 yrs | 17.9 yrs |
| Ballarat | 14.9 yrs | 18.7 yrs |
| Wyndham | 15.2 yrs | 19.2 yrs |
At the same rent, the larger flat takes longer to pay back everywhere. It makes sense when the extra space buys a third bedroom or a real second living area for family, or when you expect to live in it yourself later. For a pure rental, 60–65 m² with two bedrooms is still the efficient size. More on this in one versus two bedrooms.
One practical catch: the Building Regulations and Minister's Guideline 12 had not been amended to 80 m² when we checked. Until they are, a building surveyor may not be able to issue a permit for a small second dwelling over 60 m² under the simplified siting rules.
Rent and payback by council
Homes Victoria publishes median rents for new lettings by council area. The latest release we could use is for the September quarter 2025. Victoria's bond data does not separate detached one-bedroom dwellings, so we used one-bedroom flats and two-bedroom houses. Our NSW analysis found detached one-bedroom dwellings rent for less than flats in Sydney, so treat the one-bedroom figures as an upper bound for middle-ring Melbourne.
| Area | 1-bed rent | 2-bed rent | 60 m² build | Net yield | Payback |
|---|---|---|---|---|---|
| City of Melbourne | $570 | $678 | $199,000 | 14.4% | 9.3 yrs |
| Merri-bek | $450 | $600 | $199,000 | 12.6% | 10.5 yrs |
| Monash | $495 | $589 | $199,000 | 12.4% | 10.7 yrs |
| Darebin | $420 | $580 | $199,000 | 12.2% | 10.9 yrs |
| Whitehorse | $450 | $580 | $199,000 | 12.2% | 10.9 yrs |
| Knox | $405 | $545 | $199,000 | 11.4% | 11.6 yrs |
| Greater Bendigo | $350 | $450 | $169,500 | 10.9% | 12.1 yrs |
| Greater Geelong | $340 | $440 | $169,500 | 10.6% | 12.4 yrs |
| Casey | $340 | $500 | $199,000 | 10.3% | 12.7 yrs |
| Frankston | $385 | $500 | $199,000 | 10.3% | 12.7 yrs |
| Whittlesea | $375 | $480 | $199,000 | 9.9% | 13.3 yrs |
| Hume | $350 | $460 | $199,000 | 9.4% | 13.9 yrs |
| Brimbank | $330 | $450 | $199,000 | 9.2% | 14.2 yrs |
| Ballarat | $288 | $370 | $169,500 | 8.7% | 14.9 yrs |
| Wyndham | $420 | $420 | $199,000 | 8.5% | 15.2 yrs |
Rent data: Homes Victoria rental report. "City of Melbourne" is the inner-city council area, where few lots have room for a granny flat.
What Victoria does not charge
- No development or infrastructure contributions. Small second dwellings are exempt from development contributions plan levies and infrastructure contributions.
- No car space. The planning rules do not require parking for the flat, which saves a slab and sometimes a crossover.
- No planning permit on most suburban lots of 300 m² or more, so no town planner fees.
Costs to watch
- All-electric fit-out. No gas connection is allowed. A heat-pump hot water system and induction cooktop cost more to buy than gas equivalents but less to run.
- Domestic building insurance. Required from the builder on work over $16,000; check it is in the contract price.
- Land tax. Renting the flat out can make part of your land taxable, even though your home stays exempt. See granny flat land tax.
- Garden area. In the General and Neighbourhood Residential zones the lot must keep its minimum garden area (25–35% depending on lot size), which can rule out a flat on a small, built-up lot.
This week's worked example
Week of 19 October 2026. A new example, rule and owner report every Monday.
A 50 m² one-bedroom flat with a standard finish on a flat block, services 20 m from the house, in Ballarat: our model puts it at $149,500 turnkey ($132,000–$167,500), or $2,990 per m². At the area's median 1-bedroom bond rent of $288 a week it would return 7.4% net and pay back in 17.2 years after tax.
Rule check: Small second dwellings in Victoria are exempt from development contributions plan levies and infrastructure contributions.
From an owner (VIC, 2023): A Victorian owner-builder found the rules let them do framing, cladding and plastering, but not footings, subfloor, roofing, waterproofing, wiring or plumbing.
Questions people ask
How much does a granny flat cost in Melbourne?
About $199,000 turnkey for a standard 60 m² two-bedroom flat on a flat block, including the building permit and connections. Budget finish: $169,000. Premium: $248,000.
Can I build an 80 m² granny flat in Victoria?
The planning rules allow it from 15 October 2026 (Amendment VC306). The Building Regulations still refer to 60 m² until they are amended, so check with a building surveyor before you finalise an 80 m² design.
Do I need a planning permit for a granny flat in Victoria?
Not in most residential zones if the lot is 300 m² or more and no heritage, flood or other overlay requires one. A building permit is always needed.
Can a small second dwelling have gas?
No. A small second dwelling must not be connected to reticulated gas, so plan for electric cooking, a heat-pump hot water system and reverse-cycle heating.