New forecasting from the Housing Industry Association suggests Victorian households are renovating at a noticeably slower rate of growth than their counterparts in New South Wales, even as renovation activity nationally becomes a bigger share of residential construction. The gap points to a state-level dynamic worth understanding before committing to an extension brief in Melbourne.
Households weighing that decision are increasingly turning to home extension builders Melbourne has a growing number of, rather than putting a property on the market and buying elsewhere, a shift that lines up with what the HIA’s own figures are describing at a national level.
A national shift toward renovating rather than relocating
The HIA’s outlook describes a structural change in how Australian households are approaching their housing decisions, with more owners choosing to upgrade an existing home rather than sell, particularly in markets where land is scarce and new housing is expensive. That trend is strongest where relocating would mean giving up an established location for a smaller or more distant block.
Detached house commencements nationally are still projected to climb toward roughly 126,000 by 2027, but the HIA is explicit that renovation spending is expected to run alongside that new-build activity rather than be crowded out by it. Households are, in effect, doing both at once across different segments of the market.
Why NSW is outpacing Victoria on renovation growth
The forecast singles out New South Wales renovation investment as expected to outpace Victoria’s by nearly 50 percent in 2026, a gap the HIA attributes largely to Sydney’s steeper land costs pushing more buyers toward renovating in place rather than purchasing elsewhere. Victoria’s comparatively lower land prices have historically given Melbourne buyers more flexibility to relocate instead of extend.
That flexibility appears to be narrowing. As inner and middle-ring Melbourne land values climb and greenfield estates push further from the city centre, the calculus behind extending an existing home rather than buying further out is starting to shift in the same direction it already has in Sydney.
Queensland, South Australia and Western Australia are also posting strong renovation growth in the same forecast, though for a different reason: rapid population growth in those states is pushing existing owners to add space and amenities rather than compete for scarce new listings. Victoria’s slower growth by comparison suggests the state still has more headroom in land supply than the eastern seaboard’s tightest markets.
Even so, the direction of travel matters more than the current gap. Every state included in the HIA’s forecast is trending toward a larger renovation share of total residential work, and Victoria’s starting position simply means it has further to go before renovation activity plateaus relative to new construction.
What this means for homeowners weighing an extension now
Households weighing this decision are increasingly framing it in exactly these terms: extend now while trades are available, or wait and risk both higher construction costs and a tighter renovation market later, as demand catches up with the trend the HIA is already forecasting nationally.
Builders working across second-storey additions and rear extensions in Melbourne’s established suburbs report that inquiry volumes track closely with land price movements in a given area, a pattern consistent with the HIA’s broader thesis about land scarcity driving renovation demand.
If Victoria’s renovation spending growth continues to close the gap with NSW over the next few years, as the underlying land cost pressures suggest it will, homeowners currently weighing an extension against a move may find the economics tilting further toward staying put and building up or out on the block they already own.
For a state that has traditionally relied on comparatively affordable outer-suburban land to absorb population growth, the HIA’s figures are a reminder that the equation is slowly changing. Extension and second-storey addition inquiries in established Melbourne suburbs look set to keep climbing as that shift plays out over the remainder of the decade.