As Australia works to meet its ambitious target of 1.2 million new homes by 2029, a parallel trend is helping shape the market: demolitions.

New data from the Australian Bureau of Statistics shows over 20,000 dwellings were approved for demolition in the 12 months to March 2025 — with a vast majority being standalone homes. These demolitions aren’t just a symptom of ageing stock. They’re a signal of transformation — particularly in high-growth markets where density is increasing and new housing formats are emerging.

Knockdowns by the Numbers

Melbourne leads the nation, with more than 6,000 houses approved for demolition in a single year. It’s closely followed by Sydney, with over 5,300 homes facing the wrecking ball. Together, the two cities account for more than half of all demolitions nationally.

Approved House Demolitions (12 months to March 2025):

Outside the capitals, regional areas are also seeing movement. Regional NSW led the non-metro demolitions with 1,759 homes, followed by regional Queensland with 1,152, and regional Victoria with 1,042.

Why Are So Many Homes Being Demolished?

According to REA Group senior economist Anne Flaherty:

“Demolitions happen because new homes are being built. Hopefully for every home that’s demolished, it can result in more than one home replacing it.”

In other words, demolitions are often a precursor to redevelopment. A single detached dwelling might be replaced with a duplex, townhouse pair, or even a small apartment complex — depending on local planning allowances.

In a market grappling with affordability and land supply, this kind of infill densification is crucial.

Units: Fewer Demolitions, Slower Turnover

While houses dominate demolition activity, some unit stock is also being cleared. But at a much lower scale.

Rebuilding vs. Replacing

While 20,000 homes were cleared for demolition, the same period saw 181,000 new homes approved for construction. On face value, that’s a healthy replacement ratio — more than nine new homes for every one removed.

But here’s the rub: to meet the national housing target, we need at least 240,000 new homes approved per year. Which means the current pace still falls short — especially when you factor in construction lags, finance hurdles, and cancelled or delayed projects.

Barriers to Redevelopment: Cost, Rates, Risk

Anne Flaherty explains it clearly:

“It’s very expensive to build new, which means the kinds of homes being built are the ones most likely to generate sufficient profits for developers.”

That means greenfield house-and-land packages — particularly on the urban fringe — remain the most viable product for many developers.

In contrast, medium-density redevelopment in established suburbs is often hampered by:

– High land values
– Tight margins
– Planning complexity
– Cost per square metre pressures

Many builders report that the cost of constructing townhouses or boutique apartments in inner and middle suburbs has become commercially unviable unless prices rise significantly or interest rates fall.

What’s Likely to Change?

We’re already seeing early signs of a rebound in some markets. As interest rates begin to ease and property prices stabilise, redevelopment becomes more attractive — particularly in markets like Brisbane, Adelaide, and parts of regional NSW and Victoria.

Planning reforms such as the NSW Transport Oriented Development Program are also designed to unlock more density around train and metro hubs — paving the way for more demolitions and rebuilds over the next decade.

What This Means for Builders

For builders, the demolition data offers more than just an interesting headline. It provides insight into future opportunity.

Key Takeaways:
– Knockdown-rebuilds are here to stay — and likely to increase in metro areas where new land is scarce.
– Builders with experience in duplexes, townhouses, and small-lot housing will have a competitive edge — especially if they understand planning pathways.
– Volume builders should consider satellite offices in regional hubs where demolition activity is creating new land supply.
– Designers and custom builders should be looking at ageing inner-suburb stock as prime candidates for infill projects.

The Good Builder View

The headline might be about demolition — but the real story is about transformation.

Australia is on the cusp of a major shift in how and where we build. Knockdowns are part of that picture — enabling us to replace underutilised housing with higher-quality, better-designed, and more appropriate stock for modern living.

The builders who will win in this next phase are those who lean into the challenge, understand the emerging policy environment, and collaborate with developers and councils to unlock smarter, better homes.

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Author: TGB Editorial