New builds and renovation spending is surging as knock-down rebuilds decline, new research shows.
Analysis from KPMG Australia has revealed that 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 per cent of all housing spending in 2025-26, down 2.6 per cent from the 2021-22 peak.
KPMG Urban Economist Terry Rawnsley believes 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”, Rawnsley says.
"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.
According to Rawnsley, 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.
"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”, he concluded.