Why renovation spending is still near record levels, KPMG finds

What happened

Australians are renovating almost as much as they were at the pandemic-era peak, even as the market shifts away from knock-down rebuilds, according to kpmg.com.

KPMG's analysis found investment in new builds has risen 20 per cent over the past four years, while spending on one-for-one knock-down rebuilds has fallen 32 per cent over the same period. Renovations ("alterations & additions") made up 37 per cent of all housing spending in 2025-26 — down only 2.6 percentage points from the 2021-22 peak — and renovation activity was up almost 5 per cent over the past year, reaching $56.2 billion nationally. That's a long way from fading: renovation's share of housing spending was 33 per cent in 2019-20, climbed to 40 per cent by 2021-22 as working from home changed how people used their homes, and has eased only slightly since. KPMG urban economist Terry Rawnsley pointed to lower interest rates and rising house prices through 2025 as reasons households kept backing their existing homes before rates rose again in early 2026.

The report also found the national picture isn't uniform. In NSW, new-dwelling spending has overtaken renovation spending again in 2025-26, reversing 2021-22, and one-for-one replacement spending has almost doubled — but renovation remains heavily concentrated in heritage and coastal pockets, with areas like the Northern Beaches, Sutherland Shire, inner Sydney and the Inner West accounting for close to half of all NSW renovation spending. Victoria recorded its highest new-dwelling investment since before the pandemic ($24.4 billion), alongside $13.0 billion in renovations concentrated around inner Melbourne councils such as Boroondara and Stonnington, where heritage overlays limit redevelopment. As Rawnsley put it, in those areas "renovation and extension projects frequently provide a more practical pathway for homeowners seeking additional space or new kitchens and bathrooms." Queensland and Western Australia leaned more heavily toward new builds, with Brisbane dominating Queensland's renovation spend and WA showing no equivalent pandemic-era renovation surge.

What it means for your project

The takeaway for homeowners is that renovation demand hasn't really cooled — it's just competing with a bigger new-build pipeline in some states. If you're in an area with heritage overlays, character protections or tight subdivision rules (common across inner Melbourne and inner Sydney), a renovation is still likely to be your most realistic path to more space, rather than a knock-down rebuild or a duplex.

Kitchens and bathrooms are the upgrades KPMG's report singles out, and they remain two of the biggest line items in any renovation budget. A typical kitchen renovation here currently runs to a $20,000 typical spend, with a usual range of $15,600 – $26,000 depending on cabinetry and benchtop choice — see our Kitchen renovation for the full breakdown by finish. A bathroom renovation typically costs $22,000, with most jobs falling between $17,200 – $28,600; check our Bathroom renovation for how size and fittings move that figure.

With activity holding near record highs, trades in sought-after renovation markets are likely to stay busy, which is exactly the environment where quotes can vary widely between operators. Before signing off on a kitchen, bathroom or any other renovation quote, it's worth running the numbers through our "is my quote fair?" tool to see how a quote compares with what we'd expect for your job, based on local labour rates and materials rather than guesswork.

It's also worth remembering that renovation spending isn't only kitchens and bathrooms. Flooring, interior painting and window replacement are common companion projects when a kitchen or bathroom job is already under way, and each has its own live cost guide — see our New flooring, Interior painting and Window replacement pages for current typical costs and ranges.

Finally, the state-by-state split is a reminder that "average" renovation costs can mask big local differences. Heritage-heavy, high-value suburbs — the kind KPMG flags as renovation hotspots — often carry higher trade demand and, in some cases, additional council or heritage approval steps that can add time and cost to a project. If you're planning a renovation in one of these areas, it's worth building a contingency into your budget and getting more than one quote before committing.