New analysis from KPMG Australia has revealed that spending on renovations has boomed over the past five years, while on a per capita basis new private residential construction is at its lowest level since 1987-88.
Adjusted for inflation, spending on new private residential construction in 2023-24 was 14 percent lower than five years earlier, while spending on renovations is up 6.5 percent.
Meanwhile renovation spending has climbed from 34.2 percent of total residential construction spend in 2018-19 to 40 percent in 2023-24.
“For every nail hammered and brick laid in residential construction 40 percent of it is going into renovating a pre-existing home,” says KPMG Urban Economist Terry Rawnsley.
“This indicates that there is not enough money and resources being attracted to expanding the housing stock. More straightforward planning processes and lower risks for builders make renovating existing homes a favoured option over adding multiple homes on the same block.”
New private residential construction also includes one-for-one replacements, where a detached home is demolished and replaced with a single new home. KPMG analysis indicates that almost 10 percent of new private residential construction spending is on one-for-one replacements.
Victoria has the highest one-for-one replacement rate at 12.6 percent of new residential construction, followed by WA at 9.1 percent, and NSW at 8.7 percent.
Share of one-for-one replacements of new dwelling investment
| NSW | VIC | QLD | WA | Rest of Australia | Australia | |
| 2018 | 8.1% | 15.9% | 6.0% | 8.3% | 14.0% | 10.5% |
| 2019 | 8.1% | 15.5% | 6.4% | 8.2% | 13.8% | 10.7% |
| 2020 | 9.4% | 18.2% | 6.2% | 8.8% | 15.3% | 12.5% |
| 2021 | 14.3% | 17.2% | 8.6% | 9.0% | 14.9% | 13.9% |
| 2022 | 20.3% | 19.1% | 9.3% | 10.0% | 17.5% | 16.7% |
| 2023 | 12.0% | 15.0% | 10.2% | 12.0% | 14.6% | 12.9% |
| 2024 | 8.7% | 12.6% | 6.7% | 9.1% | 11.1% | 9.8% |
The boom in one-for-one replacements has been heavily influenced by COVID-19, when the fall in international migration dramatically reduced demand for new dwellings, while lower interest rates, a surplus of construction labour and a desire for home upgrades during lockdown lead to a jump in activity.
In both NSW and Victoria, one-for-one replacements was around 20 percent of all new private residential construction in 2021-22. This is in addition to the spike in renovations during this period.
Inner city and coastal locations are seeing the most renovation activity. The high property values in high amenity coastal areas are making one-for-one replacements commercially feasible. In the inner city, restrictive planning and heritage regulations are also a factor in preventing more than one dwelling from being added to a block.
Top 10 LGAs for renovations (total spend and percentage of construction spend)
| Rank | LGA | Value of total renovations ($m) | Value of total residental building ($m) | Renovation share of total residental spend |
| 1 | Brisbane | $874.2 | $5,136.4 | 17% |
| 2 | Northern Beaches | $357.8 | $994.2 | 36% |
| 3 | Boroondara | $311.1 | $1,189.9 | 26% |
| 4 | Mornington Peninsula | $288.1 | $1,032.5 | 28% |
| 5 | Stonnington | $286.6 | $1,219.9 | 23% |
| 6 | Gold Coast | $275.6 | $4,220.9 | 7% |
| 7 | Sunshine Coast | $225.7 | $1,755.6 | 13% |
| 8 | Sydney | $225.4 | $811.4 | 28% |
| 9 | Inner West | $209.7 | $473.7 | 44% |
| 10 | Woollahra | $190.3 | $522.6 | 36% |
Brisbane is by far the largest LGA in Australia which explains the significantly higher spend
“Homeowners are absolutely entitled to renovate their homes to add value to their investment and to ensure existing housing stock is maintained. However, shifting some of the labour and materials away from renovations and one-for-one replacements towards the construction of new housing stock can help to relieve current housing shortages,” says Terry Rawnsley.
There needs to be planning settings which encourage investment in increasing housing density, rather than preference for one-for-one replacements.
Share of New Building and 1 for 1 Replacements & Alterations & Additions of Dwelling Investment 2023-24
| New Building (excluding 1 for 1 replacments) | 1 for 1 replacements & renovations | Total | |
| NSW | 51% | 49% | 100% |
| VIC | 59% | 41% | 100% |
| QLD | 52% | 48% | 100% |
| WA | 57% | 43% | 100% |
| Rest of Australia | 54% | 46% | 100% |
| Australia | 54% | 46% | 100% |
For LGA breakdowns and further information
Hayden Jewell
+61 423 868 454
hjewell@kpmg.com.au