Why is dual occupancy housing so scarce? Investor returns are higher, supply is crucial.

Multigenerational homes can boost overall property values by up to 20 percent and add up to one third to an investment property’s rental income, but they are still relatively rare.

Dual occupancy detached housing is a type of housing in which two separate residences are located on the same plot of land. There is a main residence and an ancillary or secondary dwelling, where the ancillary or secondary dwelling is smaller than the main residence.

An ancillary dwelling typically has one or two bedrooms and two to three cars (on site) in a dual occupancy detached house.

Local councils across Australia have different planning regulations, which should, in my opinion, be the same everywhere. This lack of conformity (with very clear guidelines) is hindering the construction of this important housing stock.

In Australia, one in five households have two generations and ten percent have three generations. Within the next decade, these numbers are expected to reach 25 and 15 percent, respectively.

The supply of housing that caters well to multi-generational and multiple tenants is limited.

There is evidence to suggest that this demand could be as high as 25 percent, but less than 5 percent of Australia’s existing housing stock is able to meet it.

Compared to other housing types, dual occupancy product already shows a much higher return for investors. A key to getting a better rental yield is holding property that facilitates sharing. It is often better to have two sources of rental income than one.

Multigenerational households are attracted to such dwellings when they are owned by owner occupiers. First-time home buyers and empty nesters will also find this product appealing.

A changing demand for housing in the future

Future prospects: what lies ahead?

According to our research, demographics play an important role in shaping future housing demand. In the coming decade, how will Australia’s demographics look?

There will be two demographic segments featured: Baby Boomers and Millennials.

It is very common for baby boomers to downsize and/or retire in their local area as they grow older. Some, however, are not interested in trading in their detached home for a tight apartment in a mid- to high-rise building. There is a real need for a ‘middle ground’ product.

Even better would be one that can accommodate a relative, grandchildren, visitors, a tenant, and, eventually, a live-in caregiver.

As millennials purchase their first homes, they often seek assistance to pay the mortgage. Tenants are now welcomed by many landlords.

When it comes to property investing, this younger demographic segment is different from their parents because they know the pitfalls of sharing rental accommodation and tend to buy an appropriately sized investment property that can accommodate two or more tenants while maintaining a premium rent.

Dual occupancy housing appeals to both segments.

Analyses of rents and prices

A recent study by our firm shows that a property that is designed for multigenerational households or two (or more) tenants can increase its overall value by up to 20% and its rental income by around a third.

According to our analysis of the Southeast Queensland market, dual occupancy homes can achieve gross rental yields between 6 and 8% for permanent tenancies and between 15 and 20% for short-term tenancies.

Additionally, we found that dual occupancy houses resold for between 12 and 15 percent more than dwellings without a dedicated secondary abode in Southeast Queensland when we examined recent housing resales.

It’s no surprise that dual occupancy housing is in high demand.