New builds and renovation spending surge as knock-down rebuilds decline

5 October 2026

New analysis from KPMG Australia reveals investment in new builds has risen 20 per cent over the last four years, while spending on new homes that were a one-for-one replacement of an existing dwelling (knock-down rebuilds) is down 32 per cents over the same period.

Alterations & Additions (renovation) spending has also seen a resurgence, making up 37% of all housing spending in 2025-26, down 2.6 per cent from the 2021-22 peak.

KPMG Urban Economist Terry Rawnsley says sensible reforms to the planning system are a large factor in the shift away from knock-down rebuilds to new builds.

"People are rethinking their options and prioritising what makes economic sense. A few years ago, an old house with restrictive planning controls would have been a renovation or a knockdown rebuild. Now, the option to add more dwellings like duplexes to a site is much more viable.”

"A consistent drop in one-for-one replacement coupled with the boost in new home investment shows that densification is slowly starting to work as more land in established suburbs is unlocked to help increase overall housing stock."   

Despite a drop in knockdown rebuilds Australians are still keen renovators, with renovation activity up almost 5 per cent in the last year and now worth $56.2 billion, close to the 2021-22 peak.

In 2019-20, 33 per cent of spending on housing went towards renovations. As working from home changed how people used their homes, this share rose to 40 per cent by 2021-22.

"COVID fundamentally changed the way Australians used their homes and sparked a wave of renovation activity that still remains well above the 10-year average despite soaring construction costs and governments encouragement of more new housing to be built," Rawnsley said.

"In 2025, comparatively lower interest rates increased household budgets, and rising house prices may have encouraged people to invest in their existing homes boosting the pipeline of reno spending before interest rates rose again in early 2026."

“While spending of renovations remains strong, the growth in new residential builds during 2025-26 is encouraging, with planning changes and market forces helping to direct more investment towards actually boosting housing stocks.”

New South Wales

During 2025-26 the value spent on new dwellings in NSW has flipped back to the dominate housing investment, exceeding spending on renovations.

This contrasts with 2021-22, when the value spent on renovations in NSW exceeded spending on new dwellings, for the first time since 2012-13. Meanwhile, spending on one-for-one replacement projects almost doubled during the same period.

Renovation activity in New South Wales remains highly concentrated, with inner suburban heritage areas and popular coastal locations accounting $2.1 billion in renovation spending, equivalent to almost half (48 per cent) of all spending on renovations across the state. "Areas such as the Northern Beaches and Sutherland Shire continue to attract significant renovation activity, because they have a large concentration of high-value waterfront and ocean-facing properties where people want to live,” Rawnsley said.

At the same time, inner-city councils including Sydney and Inner West also feature prominently, reflecting the continued investment in older character homes, many of which are heritage-listed and requiring extensive upgrades and maintenance."

Wollongong is the only regional local government area to feature among the state's top ten renovation markets, reflecting both the limited availability of new housing opportunities along the city's coastal strip and growing investment in the renewal and upgrading of older homes in established neighbourhoods.

Victoria

Victoria's housing market continues to be shaped by a mix of new construction, renovation activity and replacement housing. During 2025-26, $24.4 billion was invested in new dwellings, the highest level recorded since before the pandemic, while spending on renovations totalled $13.0 billion and one-for-one replacement projects accounted for a further $4.2 billion.

Renovation activity increasing sharply during the pandemic but did not overtake new build investment like in NSW.

Victoria continues to record a higher rate of one-for-one replacements than New South Wales. This reflects the different development opportunities available across the two states, with suburban Melbourne generally offering fewer viable townhouse and apartment development opportunities than comparable locations in Sydney. As a result, homeowners in Victoria are more likely to pursue replacement projects rather than redevelop sites for higher-density housing.

“The historical subdivision pattern has yielded larger lots in Melbourne compared to Sydney. These larger lots are better suited to a knock-down rebuild as opposed to the smaller lots in Sydney, which may be more expensive to knock down and rebuild,” Rawnsley said.

Renovation activity in Victoria is heavily concentrated in a relatively small number of locations, with areas close to Melbourne’s CBD accounting for more than half (51 per cent) of all renovation spending.

Across these leading renovation markets, average spending reached $218 million, representing around 18 per cent of total residential building activity.

Many of the state's strongest renovation markets are located within 10 kilometres of the city. Councils such as Boroondara and Stonnington feature prominently, reflecting ongoing investment in older housing stock that is often subject to restrictive planning controls, heritage overlays and neighbourhood character protections, making it difficult to add more than one dwelling to an existing housing lot.

“In these areas, renovation and extension projects frequently provide a more practical pathway for homeowners seeking additional space or new kitchens and bathrooms," Rawnsley said.

Greater Geelong is the only regional local government area to rank among Victoria's top 10 renovation markets. Its presence reflects strong investment in the renewal of older inner-city housing, as well as ongoing upgrades to coastal properties across the broader region.

Queensland

During 2021-22, $14.1 billion was spent on new builds in Queensland while $13.7 billion was spent on renovations and around $1.4 billion on one-for-one replacements.

In 2025-26, new builds reached $17.9 billion while renovations and one-for-one replacements was down slightly ($13 billion and $1.3 billion respectively).

Growing property prices and a rapidly growing population have seen an increased focus on adding to the Queensland housing stock.

Queensland's top 10 local government areas accounting for 78 per cent of all spending on renovations. On average, these areas recorded $202 million in renovation spending, equivalent to around 11 per cent of total residential building investment across the state.

The City of Brisbane dominates renovation spending, with almost $1.5 billion given its uniquely large boundaries that cover the majority of the city and its inner suburbs.

"The concentration of renovation activity reflects the different housing market dynamics across Queensland. In many regional areas, investment in new housing remains a more viable option for households seeking a modern home, reducing the need for extensive renovation activity," Rawnsley said.

Noosa recorded the highest share of renovations among the leading LGAs, with renovations accounting for 32 per cent of all residential building activity. This reflects the scarcity of new coastal development opportunities and a strong preference among homeowners to upgrade and modernise existing properties rather than relocate.

Western Australia

Western Australia's housing market continues to be dominated by investment in new housing. In 2025-26, $8.2 billion was spent on new dwellings, compared with $5.0 billion on renovations and $556 million on one-for-one replacement projects.

Unlike the other major states, Western Australia did not experience a significant surge in renovation activity during the pandemic. Spending remained relatively stable, while one-for-one replacement projects recorded only a modest increase in 2022-23 before returning to more typical levels.

“In comparison, land is far scarcer in the east coast cities, so homeowners are much more likely to knockdown rebuild or commit to major renovations rather than starting from scratch.”

Investment in new dwellings has strengthened considerably over the past three years, reflecting strong population growth and ongoing demand for housing. This momentum continued in 2025-26, with spending on new residential construction increasing by 11.4 per cent, underscoring the important role of new housing supply in meeting the state's growing needs.

“There is simply a lot more space in Perth to build new housing in desirable locations,” explains Rawnsley.  

For the top 10 LGAs, average spending on renovations was $58 million, representing 9 per cent of all residential building activity in Western Australia. These 10 LGAs accounted for 45 per cent of all renovation spending in the state.

The pattern of renovation activity in Western Australia differs from that of the eastern states, with less concentrated spending in inner-city locations as activity spreads more evenly across Perth's inner, middle-ring and outer suburbs.