![Wollongong builder John Totenhofer says his imported Japanese-wood granny flats designed for local regulations can tap ...](http://web.archive.org./web/20170731094844/http://www.afr.com/content/dam/images/g/x/l/0/x/d/image.related.afrArticleLead.620x350.gxjsae.png/1501408150950.jpg)
House prices are at record highs, renovations cost a fortune and kids can't afford to leave home. It's little wonder people are turning to granny flats. But that doesn't mean they have to be ugly.
From a workshop in the Wollongong suburb of Balgownie, builder John Totenhofer has an alternative to the plasterboard box that - like a temporary classroom - is craned over back fences to sit on a concrete slab in a growing number of Australian backyards.
It doesn't just look different from the standard extra living shed - it works differently, too. Totenhofer is building kit-like Japanese-style spaces that don't need a concrete slab, go up without nails - the pre-cut pieces of joinery interlock together - and can be taken apart and rebuilt easily with a new panelling or fittings such as windows as needed.
"You can pull the house apart," Totenhofer says. "All the sections of timber are big enough and there are no nails. You can then cut the foundations off with grinder. There's enough integrity in the timber at the beginning. No concrete. Just like the temples and shrines it has multigenerational use."
![Japanese timber imported for assembly into the granny flats.](http://web.archive.org./web/20170731094844/http://www.afr.com/content/dam/images/g/x/l/1/v/s/image.imgtype.afrArticleInline.620x0.png/1501383968865.jpg)
The Kashimo Studios units designed to fit council regulations in NSW and ACT are intended as a premium version of the granny flats that offer a cost-effective way to boost housing capacity and density. Bathroom fittings aside - which can cost as much as a buyer wants to spend on them - Totenhofer's Japanese hinoki (cypress) and sugi (cedar) dwellings cost between 10 per cent and 20 per cent more per square metre than their conventional equivalent.
"They all start around $40,000 to $45,000 for a 20 square metre one," he says. "I can get one, if you choose more simple products, for about $48,000."
And it is a growing market. In NSW, where the Affordable Rental Housing – State Environmental Planning Policy that allows property owners to rent their secondary dwellings came into place in 2009, demand for tax depreciation schedules - used to calculate tax deductions - for granny flats rose 24 per cent in the year to June 2017, says quantity surveyor and tax consultancy BMT Tax Depreciation. In Queensland, where the regulations vary according to local councils, demand jumped 41 per cent.
The growth is likely a response by investors wanting to find affordable alternatives, given soaring median house and unit prices, says BMT chief executive Bradley Beer.
"This has led many investors to consider creative means to boost their portfolio's yield, such as the addition of a granny flat," Beer says.
![Totenhofer's homes, framed with cypress pillars measuring 105mm by 105mm can be taken down and reassembled.](http://web.archive.org./web/20170731094844/http://www.afr.com/content/dam/images/g/x/l/0/v/z/image.imgtype.afrArticleInline.620x0.png/1501383968960.jpg)
These could be rented at a rate achieving around a 15 per cent yield annually, he says.
Not every state permits granny flats, however. While WA, Tasmania, ACT and NT allow it, they cannot be used as income-producing secondary dwellings in Victoria or SA.
Totenhofer says his units, with components cut to order from secondary forests grown around Kashimo village in central Japan's Gifu prefecture, can be assembled on site in five or six days with no need to clear soil or lay a slab.
But he also says the wooden structures - which meet Australian fire and other building materials standards - are designed to encourage people to live in smaller dwellings.
![John Totenhofer's imported cypress and cedar joinery doesn't require nails.](http://web.archive.org./web/20170731094844/http://www.afr.com/content/dam/images/g/x/l/0/v/f/image.imgtype.afrArticleInline.620x0.png/1501383969044.jpg)
"We do need to start rethinking about how much stuff we have," he says. "The blocks are getting smaller but we're not changing our attitude about the buildings we're putting on it. We're still trying to put a big house on it."
A built-to-order kit home, with less storage space, is also more appropriate in the growing sharing economy and digital supply of goods and services, he says.
"As we have more things on demand, we don't need to have a huge video collection, a huge book collection," Totenhofer says. "If you think about it, our houses can start to reflect the fact that we don't need to have a huge store of resources."
![State/territory breakdown of what you can get for your granny.](http://web.archive.org./web/20170731094844/http://www.afr.com/content/dam/images/g/x/l/0/q/c/image.imgtype.afrArticleInline.620x0.png/1501383969221.jpg)