Revealed: The Sydney LGAs splurging on home renovations

The scale of Sydney’s housing challenge has been laid bare by new analysis which shows nearly half of all new private spending on residential building is going towards renovations and rebuilds rather than construction of new homes, with the problem particularly acute in the inner city, north shore and eastern suburbs.

The analysis by KPMG urban economist Terry Rawnsley shows NSW languishing behind other states, with just 51 per cent of private spending on new dwellings – a nearly $8 billion decline over the past seven years.

Approvals and completions in Greater Sydney fell to 25,852 and 21,214 over the year to June, 24 per cent and 18 per cent below the five-year average, respectively.

Victoria, Queensland and Western Australia also recorded decreased spending on new buildings compared with 2017-18 levels. NSW was particularly affected, declining by $7.8 billion over this period compared with $870 million for Western Australia.

In 2023-24, spending on new residential construction across Australia was 14 per cent lower than five years earlier, while spending on renovations is up 6.5 per cent, climbing to 40 per cent in the past financial year.

Despite NSW Premier Chris Minns calling for the construction of more infill housing rather than on Sydney’s fringe, the analysis shows in the past year, renovations represented a large proportion of construction spend in affluent LGAs such as Mosman (66 per cent), Hunters Hill (57 per cent), Waverley (49 per cent) and Inner West (44 per cent).

“This indicates that there is not enough money and resources being attracted to expanding the housing stock,” Rawnsley said, saying more straightforward planning processes and lower risks for builders were reasons renovations were being prioritised over new dwellings.

The LGAs that dominated spending were also primarily concentrated in Sydney’s north. Northern Beaches accounted for more than 13 per cent of the renovation spending in Greater Sydney – residents spent more than $357 million on renovations in the past financial year. This was 36 per cent of the LGA’s total residential building spend.

“The inner city and middle ring areas of Sydney have the existing infrastructure to support more densification, instead almost half of renovation investment in Sydney is going into these 10 LGAs,” Rawnsley said.

Rawnsley said the spending in these LGAs was unsurprising, saying these were places where properties were “very tightly held”. This accounted for the lack of new dwellings built in these LGAs, he said.

“It’s no surprise that people, if they want more living space, they’re not buying a new home. They’re just renovating it and extending it,” he said.

“Those eastern harbourside suburbs are very prized and people won’t want to move out of there.”

Conversely, in Sydney’s south-west and west, the proportion of spending on renovations and one-for-one replacement of existing stock was lowest in Liverpool (2 per cent), Blacktown (2.5 per cent) and Camden (3 per cent).

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