Renovations are booming in Australia. Recent data shows Australians are spending more than A$54 Billion annually on renovations and alterations to existing homes. That’s nearly a third of total residential construction spend, underscoring the significance of the renovation sector within the broader construction industry.

For Builders, Trades, Designers, and homeowners, understanding the trends behind this market is critical. In this article, we’ll cover:

1. The role of renovations in the broader construction and housing supply debate
2. Labour supply and material cost trends impacting the renovation sector
3. Where renovation spending is going — and how it’s shifting
4. The rise of the DIY renovation segment

Read on to discover insights and market trends on project spend, labour costs, materials, the DIY sub-segment, and the critical role that renovation plays in the housing supply challenge.

Australia’s housing challenge is clear: the country needs more dwellings, and fast. Government targets aim to boost new home completions, but constraints in land release, financing costs, and planning approvals continue to slow delivery.

Within this backdrop, renovations are filling a critical gap. For many homeowners, altering or upgrading an existing home is more achievable than moving or building anew. Knockdowns and rebuilds are part of the picture, but extensions, second-storey additions, and alterations to existing layouts are increasingly common. This helps households adapt to changing needs (like growing families, working from home, empty nesters, multi-family living, aging in place, and more) without leaving their communities.

Australia’s housing shortage means more families are staying put and renovating instead of moving. For Designers, Builders and Trades, this creates opportunity - but also adds pressure. Clients want maximum value from their spend, and they’re asking tougher questions about costs, timelines, and ROI. Builders who can guide them through smart renovation choices are winning more work—and keeping clients happy.

The Result: Renovations now account for around 30% of total residential construction activity, and that market share is climbing year-on-year.

The renovation market, like all construction segments, faces two persistent challenges:

1. Labour shortages – A shortage of skilled trades, from Carpenters to Electricians, continues to inflate labour costs and extend project timelines. Demand from both new builds and renovations keeps the sector under pressure.
2. Material costs – Supply chain disruptions post-COVID, along with inflationary pressures, have lifted the price of key materials such as timber, steel, and plasterboard. While some costs have stabilised in 2024–25, prices remain well above pre-pandemic levels. For homeowners, this means higher budgets; and for Builders, tighter project margins where client budgets don't scale in step with these cost inputs.

Professionals who can help clients navigate these pressures — through clever design choices, efficient planning and delivery, and realistic pricing — are better positioned to capture market share.

Renovation activity hit A$54 billion in annual spend last year, yet spending on renovation scope is not evenly distributed. Renovation spending is shown to be driven by:

• Families extending homes instead of upgrading
• Owners modernising key areas of the home like kitchens and bathrooms
• Energy efficiency retrofits becoming mainstream underpinned by government incentives
• Investors upgrading older stock to meet rental demand and rising rents

This means steady pipelines of work but success depends on guiding clients toward renovations that deliver the most bang for buck.The strongest growth areas we're seeing include:

• Kitchens and bathrooms – These remain the top renovation projects, accounting for a significant share of spend due to their impact on lifestyle and resale value.
• Outdoor living spaces – Decks, patios, and landscaping have grown in demand, driven by lifestyle changes and a greater focus on at-home leisure.
• Energy efficiency upgrades – Solar, insulation, double-glazing, and smart home systems are trending upward as households seek to reduce bills and meet sustainability goals.
• Extensions and reconfigurations – With rising house prices and borrowing costs, families are more likely to expand or reconfigure existing homes rather than upgrade to a new property.

The trend is clear: Australians are investing in quality-of-life and sustainability improvements, often with a view to long-term liveability rather than short-term resale.

Not all renovations are equal. Here’s a renovation project scoping hierarchy you can use in planning discussions with your clients when they ask you where they should invest first and how larger projects could be staged:

Adding a Bedroom

• In a tight housing market, bedrooms = value.
• Adding a bedroom to a home often adds more resale value than a new kitchen or bathroom since the property can jump into a new buying bracket and secure higher bank valuations

Remodelling Kitchens and Bathrooms

• Still the “showpiece” renovations that sell homes and add day-to-day functionality
• A modern kitchen can be the difference between a property sitting on the market vs. multiple offers
• Bathrooms, especially ensuites, are high-impact upgrades buyers and renters increasingly expect

Living Spaces and Open-Plan Layouts

• Knocking out walls to create light-filled living areas, and adding decking and pergolas for outdoor spaces remains a highly popular choice of renovation
• Delivers immediate lifestyle ROI even if not always the highest financial return

Energy-Efficient Upgrades

• Double glazing, solar, insulation—clients are now asking about this from day one
• Energy improvements don’t just save money, they future-proof homes against cooler winters and hotter summers

When your clients can’t decide, try using these approaches:

• Run the numbers – Show them the cost vs. likely value-add
• Stage the works – Suggest completing renovations in logical phases (eg, bedroom extension first, then bathroom remodel)
• Match the market – Advise based on suburb expectations
• Educate, don’t upsell – Position yourself as a trusted advisor

Not all renovations involve professional contractors. The DIY market is thriving, supported by major retailers, as well as a surge of online resources from tutorials and content creators. Painting, landscaping, and cosmetic updates remain popular areas for DIY, particularly during cost-of-living pressures.

While DIY has limits (structural works still demand licensed professionals), it plays a significant role in the total renovation spend. Homeowners often take on DIY projects alongside professional works, blending both approaches to stretch budgets further.

For Trades and Designers, this trend creates opportunities: providing expert consulting, partial project value-add services, or supplying trade-only products that enable homeowners to tackle smaller jobs themselves, while you build trust and context for their next major project.

So what do industry professionals need to remember in the current market? Here's our team's top takeaways:

• Renovations are a major market driver of Australia’s construction industry, representing nearly one-third of spending.
• Labour and Material costs remain under pressure, requiring realistic budgeting and clear client communication.
• Consumer spending is shifting toward kitchens, bathrooms, energy upgrades, and outdoor spaces, reflecting lifestyle and sustainability priorities.
• DIY is here to stay, with opportunities for industry professionals to support, guide, and complement homeowner projects.

As state and federal governments push for new housing supply, renovations will continue to grow in importance — both as a way for households to adapt existing homes and as a resilient market segment for Builders, Trades and Designers. For industry professionals and clients alike, recognising these dynamics is key to planning successful projects in 2025 and beyond.