Australia’s once robust home renovation market is showing signs of slowing as rising living costs, scarce tradespeople, and waning consumer confidence weigh on property owners. For the first time in over a year, the number of renovation loans taken out during the June quarter declined, particularly among owner-occupiers financing home improvements.
New data from the Australian Bureau of Statistics (ABS) and the Housing Industry Association (HIA) reveal that renovation lending has dropped from record levels seen in mid-2022, when the sector experienced a strong post-pandemic surge. This shift comes amid a challenging property environment marked by a series of interest rate hikes, declining house prices, and uncertainty in government housing policies.
Contributing to the downturn in residential renovations is a rising demand for labour in other sectors. Major infrastructure projects, such as preparations for the Brisbane Olympics, along with a boom in data centre construction, are drawing tradespeople away from the housing market, driving up labour costs and limiting availability for renovation work.
KPMG urban economist Terry Rawnsley noted that while Australians have historically shown strong interest in home improvements, current conditions are prompting many to delay projects. He said some homeowners appear hesitant after receiving high quotes from builders, choosing to wait for more affordable options or better market conditions.
“There’s probably still latent demand for renovations, but people are getting quotes from multiple builders and being shocked by the costs,” Rawnsley explained. “With house prices softening and the market favoring buyers, some owners may opt to purchase rather than renovate.”
This cautious approach is reflected in the experience of Sydney resident Rajan Sharma, who initially planned to remodel his family home in Quakers Hill. Sharma, the chief operating officer at Investor Partner Group, was deterred after receiving renovation estimates ranging from $350,000 to $450,000 for his four-bedroom, two-bathroom house. “We have delayed our decisions and are holding tight while interest rates remain high,” he said. Sharma added that even small increases in interest rates significantly impact household budgets, particularly when financing major renovations from home equity.
Despite the overall slowdown, there are some modest reductions in renovation costs for certain rooms. HIA data indicates average kitchen renovation costs declined slightly, from $40,810 in 2024 to $39,690 in 2025, while typical bathroom refurbishment expenses dropped from $35,580 to $26,380 within the same period.
Industry experts suggest that the reduced focus on renovations is shifting demand towards new housing, a sector currently struggling to meet government targets for increased supply. According to HIA spokesman Tim Devitt, housing delivery is not keeping pace with Labor’s objectives, posing additional challenges for the broader property market.