Are tiny homes a good investment?

Who remembers the Great Australian Dream? Owning a home on a quarter acre block – ideally with a clothesline out the back and verandah out the front, as John Williamson sings in Home Among the Gum Trees.  

These days, with housing prices soaring and interest rates reaching incredible heights, that dream seems unattainable for many young Australians – or, at the very least, the dream looks a bit different.    

If you’re hoping to enter the property market today, you might consider looking at options that are a little left-field – emphasis on the little! 

Tiny homes are ‘smaller than a standard house and suitable for one or two residents,’ according to Deakin expert Adrian Lee. Interest in tiny homes has grown significantly in recent years, thanks to the unique benefits they boast, including like affordability and sustainability. So, are tiny homes a good investment? Let’s find out. 

How much are tiny homes in Australia?  

If you’ve ever enjoyed a 5-course degustation or investigated the price of a diamond ring, you’ll know that small doesn’t always mean cheap.  

When it comes to houses, though, size does make a difference. ‘The cost of a tiny home can range from a few thousand to several hundred thousand dollars, depending on size, quality, and compliance with planning and building regulations,’ says Deakin’s Richard Tucker.  

How much tiny homes cost in Australia depends on a lot of factors, but Canstar reckons a tiny home will set you back between $59,000 and $150,000, though it could be as little as $20,000 if you’re clever enough to put it all together yourself. Compare that to the median house price in Australia, which is a little over $815,000.  

While on paper it sounds like tiny homes are a good investment, Tucker says that the truth is a little different when you compare them to normal sized homes.  

‘Professionally built THOWs (tiny homes on wheels) can cost up to three times more per square metre than a standard house,’ Tucker says. ‘Financial modelling done in 2022 indicated that over 20 years, a 6-Star energy-rated THOF (tiny homes on foundations) of 40m² or 48m² costs over 50% more than owning a one-bedroom apartment in Geelong, primarily due to high construction and financing costs.’ 

Can I build a tiny home on my property? 

Got a big dream for a tiny home investment? Well, there are a few things to keep in mind. 

How tiny homes are built depends on the builder and type of home, but they’re generally either built from scratch or from prefabricated materials that are assembled on-site. Tiny homes on wheels can simply be towed onto a property and set down. Whether you’re building or towing, though, quite a few councils around Australia are relaxing existing laws to make it easier for people to live in tiny homes.  

This should be good news for anyone wondering if they can build a tiny home on their property, though Tucker says that there are still some challenges. ‘Regulatory barriers, particularly in planning, pose the greatest challenge [to tiny homes],’ he says. Needless to say, if you’re thinking of investing in a tiny home, you’ll need to make sure the council is on your side. 

Can you permanently live in a tiny home?  

Short answer? Not necessarily. As Lee notes, living permanently in a tiny house depends on where you are and what the house is like. 

‘This depends on the regulations state to state and council to council,’ he says. ‘Granny flats that are fixed on foundation generally allow permanent living. Tiny homes on wheels located in caravan parks generally only allow residents to live for six months. Some councils, however, are allowing tiny homes on wheels to be permanent.’ 

Councils like Surf Coast Shire are making it easier for people to live permanently in tiny homes, which is likely to be a big plus for anyone hoping to invest as either an owner-occupier or landlord.  

Some councils, though, have ‘restrictive planning policies’ that make it difficult to get approval to live permanently in a tiny home. 

So, tiny homes are good investments – but only in certain areas. 

Do tiny homes appreciate in value?  

For a tiny home to be a good investment, it needs to grow in value – investments that don’t make money aren’t of much use.  

As Tucker suggests, a combination of factors mean that tiny homes are unlikely to appreciate in value.   

‘Financially, small homes are relatively expensive to construct and difficult to finance,’ Tucker says. ‘Unless situated on owned land, they provide little to no return on investment, making lenders reluctant to offer financing.’ 

He mentions, much of the value of a tiny home is tied to the land it’s built on, meaning tiny home builders might need to consider factors beyond the house itself as part of their investment strategy. 

How big are tiny homes?  

The clue is in the name! There aren’t any legal definitions, but there are some general size guidelines as to how big tiny homes are supposed to be. 

‘It is generally considered to be a dwelling smaller than a standard house, typically suitable for one or two residents,’ says Tucker. ‘Tiny homes may be fixed in place or mobile, with those on fixed foundations generally being larger. They typically range in size from 16m² to 48m².’ 

All this means is that, if you’re looking for a good tiny home investment, you’ll want to start with anything under 48m²(otherwise you might just be looking at a regular home!).  

How long do tiny homes last?  

Can a tiny home be a good investment if it isn’t permanent? Well, unless you live in a tent or caravan, your home is supposed to go the journey – at least 60 years is considered the minimum. For tiny homes, there’s not a lot of evidence yet, but some suggest that well-built examples should stand for 30-50 years.  

As for how long a tiny home will last for people actually living in them, the jury is out.  

One of the biggest roadblocks for the lifespan of a tiny home is that, while they might suit some people (downsizers, empty-nesters, young singles or couples), these homes may lack the space to raise a growing family and can be difficult to access or upgrade for those with mobility issues.  

‘Designers have yet to fully demonstrate that tiny homes can accommodate the needs of residents at all life stages,’ says Tucker. 

How to build a tiny home 

That new home feeling – it’s hard to beat!  If you’re thinking of building to invest in a good tiny home, things can be a little different from standard homes.  

For a start, some tiny homes are entirely pre-built – all you need to do is buy one and get it towed to your property. In other cases, the homes can be slotted together quickly wherever you need. 

‘[Tiny homes] are often prefabricated off-site, allowing for significantly reduced construction times,’ says Tucker. ‘For example, HOME’s Microvillage project for homeless men (Samaritan House’s Independent Living Unit Project) was assembled on-site in about a week, after factory prefabrication, whereas traditional site-built homes would take months.’ 

So: does a tiny home really make a good investment? 

Ah, the big question! There’s so much to love about tiny homes, but as we’ve outlined here, it’s important to take a step back before taking the plunge.  

Risk is always a factor, and nothing is ever guaranteed. Property – tiny or otherwise – can be an important part of your investment strategy, but it’s always wise to consult a professional advisor before making any big decisions. If you’re wondering whether tiny homes make good investments, starting with expert advice is your best bet.