Renovation boom: 98 suburbs where property prices could surge next

Home values are set to surge even higher in some of Australia’s most exclusive suburbs, where billions of dollars worth of renovations are in the pipeline.

Pricey neighbourhoods around the country are bracing for a building boom that could push up home values further, with high-end property markets topping the list of locations with the greatest value of approved renovations.

The value of renovations approved in June hit an all-time record of $1.17 billion, with about $12.8 billion worth of renovations given the green light over the past financial year across Australia.

The latest building approvals data from the Australian Bureau of Statistics shows a huge chunk of that figure is being spent in the country’s most expensive suburbs, with wealthy property owners having the biggest appetite for renovations, particularly in Sydney and Melbourne.

The data shows the value of alterations and additions to properties approved over the past year in each SA2 region, an area defined by the ABS that typically includes a handful of suburbs. 

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The data covers the 2023-24 financial year, meaning many approved renovations would already be completed while some would still be in the pipeline.

Most of the areas with the biggest planned spend on renovations are filled with multi-million dollar properties worth many times more than Australia’s median home value of $795,000.

In the top 30 regions by renovation spend, $1.55 billion worth of alterations and additions was approved in the past financial year.

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PropTrack senior economist Paul Ryan said there were multiple factors that encouraged owners of high-value homes to invest so much in major renovations.

“More expensive suburbs reflect desirability, large land sizes and prime locations, which all make large investments in homes worthwhile for people,” he said.

Mr Ryan said financial barriers to moving home such as stamp duty — which is applied at higher rates for pricier properties in both NSW and Victoria — encouraged people to improve their current home instead of looking for a new one.

“High stamp duty burdens, particularly in premium suburbs, strongly incentivise renovation rather than moving for those looking for new uses or features from their home.”

The suburbs where homeowners are spending the most on renovations

The region with the highest value of approved renovations was Point Nepean at the tip of the Mornington Peninsula, where homeowners across the suburbs of Blairgowrie, Fingal, Portsea, Rye, Sorrento, St Andrews Beach and Tootgarook planned to spend a whopping $97.5 million on renovations.

Real estate agent and Kay & Burton Portsea director Liz Jensen said many owners were renovating holiday houses or second homes and moving to the peninsula full-time.

"A lot of people have taken the opportunity over the past few years to sell the family home in Melbourne that they hung onto for a while," she said. "They're renovating their second home to make it they're permanent residences."

This three-bedroom Blairgowrie cottage that's ripe for renovation goes under the hammer in September with a $1.25-1.35 million price guide. Picture: realestate.com.au/buy

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Meanwhile, younger couples and families were purchasing fixer-uppers and renovating as relatively affordable entry points into the desirable market, Ms Jensen said.

But turnkey properties were in highest demand, especially among wealthy, time-poor buyers.

“The people I’m selling to now are fund managers, lawyers and high income earners who have young to late teenage kids who want to live in their forever beach house,” she said.

‘Renovation boom’ in tightly held pockets

In Manly and Fairlight on Sydney’s northern beaches, $88.5 million in renovations were approved in the past year, up from about $38 million in the prior year.

Manly real estate agent and Clarke & Humel principal Michael Clarke said wealthy buyers were increasingly opting for Manly and Fairlight over neighbouring areas, and splashing cash on big renovations.

“I have never seen such a renovation boom in my life,” he said.

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With rising home values at the top end of the market, Mr Humel said many owners felt it was “almost impossible to overcapitalise”.

“A lot of people who potentially would have moved to other areas have decided they don't want to be anywhere else,” he said.

This Federation house on a 316sqm block goes under the hammer next month with a $2.8 million price guide, and has scope for further transformation. Picture: realestate.com.au/buy

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“They love where they live and as a result they’ll put whatever they've got into their place,” he said.

Real estate agent and Cunninghams director Georgi Bates said turnkey homes were in highest demand, keeping prices elevated, while strong sales results gave renovators the confidence to spend big.

“The cost of moving is expensive and people want to stay in the area,” she said. “It’s such a highly sought after location and lifestyle.”

She said many owners were renovating ‘forever homes’ or downsizing, and had no intention of flipping for a profit, further restricting supply in the tightly held market.

Previously a traditional Queenslander, this five-bedroom Bardon home that's going to auction has been extensively renovated for modern living. Picture: realestate.com.au/buy

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Other pricey suburbs with millions in renovations planned include Malvern, Toorak, Brighton and Albert Park in Melbourne, and Palm Beach, Darling Point, Double Bay, Point Piper, Rose Bay and Vaucluse in Sydney.

In Queensland, $46.5 million in renovations was planned across the inner-city suburbs of Auchenflower, Bardon, Milton and Paddington, while owners in New Farm and Fortitude Valley gained approval for $35.7 million worth of upgrades.

Record reno spend as construction crunch eases

The total value of renovations across Australia in the 12 months to June 2024 was about 6% higher than the previous financial year, hitting an all-time record in the month of June, according to the ABS.

While construction costs have gone up at about the same rate according to ABS data, Mr Ryan said conditions for renovators had improved recently, and a lift in home values was encouraging more owners to improve their homes.

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“Building shortages have eased for materials in particular, but also somewhat for labour, which, along with less uncertainty, is drawing people back into the renovation game,” he said.

“Recent strong home price growth is giving some owners the equity they need to complete renovations. This will support renovation activity for some time to come.”

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