Now this is a good looking granny flat

I like it. My mind is working overtime on this. The loft, I presume, is not counted towards the floor space, so does this mean that if the flat is designed right, you could realistically have a 2 bed plus study situation? :D
The cost for that would would be getting up toward $250K. But in Sydney's inner west, that's not necessarily over capitalising. There would flats similar to that in suburbs like Newtown being rented out for traveller accomodation - I bet every available room in Newtown would be rented this week with the gay mardi gras on.