The updated Ramsay Street will be located at the show's production base in Nunawading.
All exterior scenes are currently filmed at Pin Oak Court - the real-life Ramsay Street - but new backyards will now be created at the Neighbours studio instead.
This will allow the soap's makers to film more outdoor scenes since there is only one house with pool access at Pin Oak Court, where the show's exterior shots have been filmed for over 25 years.
Work on the set will continue into the New Year, TV Tonight reports.
Neighbours boss Richard Jasek recently promised that the soap will have a "rollercoaster" 2013.