New private residential construction is at its lowest level for almost four decades but spending on renovations has boomed, according to a new analysis.
The report by KPMG found that new private residential construction spending per capita is at its lowest level since 1987-88, as renovation spending surged from 34.2% of total residential construction spend in 2018-19 to 40% in 2023-24.
“For every nail hammered and brick laid in residential construction, 40% of it is going into renovating a pre-existing home,” said Terry Rawnsley, an urban economist at KPMG.
“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 demolishing a detached property and replacing it with a single new home, known as a one-for-one replacement.
Almost 10% of new private residential construction spending is on one-for-one replacements, KPMG found, with Victoria having the highest rate at 12.6% of new residential construction, followed by Western Aaustralia at 9.1%, and New South Wales at 8.7%.
The analysis found that investment in new housing per resident averaged $186,000 per new resident since 1993-94.
Between 2012 and 2019, new housing spending increased by 58%. But the departure of international workers and students in 2020-21 during the pandemic led to a per-capita investment spike of $1.9m per capita.
Two years later, the per-capita investment has declined by almost 50%, sinking to $113,000 in 2023-24 as population growth surged and investment flatlined, the analysis found.
Covid also had an impact on renovation spend, according to the analysis.
skip past newsletter promotion
Get the most important news as it breaks
Privacy Notice: Newsletters may contain info about charities, online ads, and content funded by outside parties. For more information see our Privacy Policy. We use Google reCaptcha to protect our website and the Google Privacy Policy and Terms of Service apply.
after newsletter promotion
Why doesn’t Greens MP Max Chandler-Mather own a home yet? – video
As new housing investment increased between 2012 and 2020, alterations and additions investment declined and reached its lowest share of 33.5% in 2017-18.
But this investment rebounded significantly in recent years – a trend further amplified since 2020 as those driven by remote work and lifestyle changes opted for larger and better homes.
An analysis of NSW, Victoria, Queensland and Western Australia found that the local government area with the greatest spend on renovations was Brisbane, followed by Sydney’s northern beaches and Boroondara in Melbourne’s east. Mornington Peninsula, south-east of Melbourne, and Stonnington, in the city’s inner south-east, made up the top five.
The analysis showed that there needed to be planning settings which encouraged investment in increasing housing density, rather than preference for one-for-one replacements, KPMG said.
“Homeowners are absolutely entitled to renovate their homes to add value to their investment and to ensure existing housing stock is maintained,” Rawnsley said.
“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.”
**How does the surge in renovation spending contribute to, or potentially exacerbate, the affordability crisis in Australia’s housing market?**
## World Today News: The Renovation Boom and the Housing Crisis
**Introduction:**
Welcome to World Today News. Today, we’re diving deep into the changing landscape of Australia’s housing market. A recent report by KPMG has revealed a surprising trend: while new residential construction is at a 40-year low, spending on renovations has surged. To help us understand the implications of this shift, we have two esteemed guests joining us today.
[Introduce Guests: Names, Affiliations, Briefly Explain Expertise]
**Section 1: The Renovation Rollercoaster**
* **Host:** The KPMG report paints a picture of booming renovation spending, even exceeding new construction projects. Can you help us understand what’s driving this trend? What factors are encouraging homeowners to renovate rather than build new?
* **Follow-up questions (depending on guest responses):**
* Are these renovations primarily driven by lifestyle changes, increased disposable income, or a combination of factors?
* How does the pandemic’s impact on remote work and lifestyle preferences play into this surge in renovation spending?
* **Host:** The report also highlights a significant increase in one-for-one replacements, where an existing home is demolished and replaced with a single new home. How does this practice contribute to the overall housing landscape?
**Section 2: New Construction: A Declining Trend**
* **Host:** The report indicates that per capita spending on new residential construction has reached its lowest point in almost four decades. This suggests a potential housing shortage. Could you elaborate on the factors contributing to this decline in new construction?
* **Follow-up questions (depending on guest responses):**
* What role do rising material costs and labor shortages play in this?
* Are there regulatory hurdles or planning restrictions discouraging developers from undertaking new projects?
* **Host:** The KPMG report suggests that planning adjustments could encourage investment in increasing housing density. Can you elaborate on what types of policy changes might help stimulate new housing construction while mitigating neighborhood concerns?
**Section 3: The Path Forward: Balancing Renovation and Construction
* **Host:** As Australia faces a potential housing crisis, how can we strike a balance between the desire for individual home improvements through renovation and the pressing need for new housing construction?
* **Follow-up questions:**
* Should there be incentives or policies encouraging homeowners to consider renovation alternatives to one-for-one replacements?
* What innovative solutions can we explore to address the increasingly complex challenges of housing affordability and accessibility?
**Concluding Remarks:**
* **Host:** Thank you both for sharing your invaluable insights into this important issue. It’s clear that Australia faces complex challenges in navigating the dynamic relationship between renovations and new construction. Addressing these challenges will require considered policy decisions, community engagement, and a collaborative effort from all stakeholders.
* **Guest Summary statements:** Provide each guest an opportunity to offer a brief concluding thought.
* **Host:** Thank you for watching/listening. For more in-depth analysis and information on this topic, we encourage you to visit world-today-news.com.
