It is the biggest decision many Melbourne homeowners make. Both paths can create a great home. The right one depends on the house you have, the land it sits on, the rules that apply, and what you want to be living in ten years from now.
Start with the land, not the house
Before comparing quotes, check what the site allows:
- Heritage Overlay (Clause 43.01): a planning permit is generally needed to demolish. Demolition of a contributory heritage building may be refused, which makes the decision for you.
- Zone and lot size: a new house may need a planning permit depending on the zone and lot size. In the General Residential Zone, building one dwelling on a lot under 300 m² needs a permit.
- Covenants and easements on title: these can limit what you rebuild.
- Bushfire and flooding overlays: these add design requirements and cost to new work.
The case for renovating
- The structure, footings and roof are in reasonable condition
- The layout works with targeted changes, such as a new kitchen, an extension or opening up living areas
- Character or heritage value is part of what you love about the house
- You want to stage the work over time
- Planning controls favour retaining the existing building
The case for knocking down and rebuilding
- Significant structural problems: failing footings, extensive termite damage, major cracking
- The layout, ceiling heights or orientation fight against how you want to live
- The house needs almost everything replaced: wiring, plumbing, roof, windows and insulation
- You want a high-performing, energy-efficient home, which is easier to design from scratch
- The renovation quote is approaching new-build territory
Our rule of thumb at AxisPro: when a renovation quote reaches around 60% of the cost of an equivalent new build, price the rebuild properly before committing. It is a prompt to look harder, not a formula.
What rules apply to a new home?
New homes in Victoria must achieve a minimum 7-star NatHERS energy rating and meet a Whole of Home energy budget covering heating, cooling, hot water and lighting. This applies to homes with a building permit issued on or after 1 May 2024. It adds design and specification requirements but also delivers a more comfortable, cheaper-to-run home.
NCC 2025 has applied to new building work in Victoria since 1 May 2026, subject to transitional arrangements.
What does demolition involve?
- A building permit is needed to demolish a house.
- Report and consent from council under section 29A of the Building Act 1993 is required where demolition exceeds certain thresholds, such as more than half the volume of the building, or where the facade is affected. Council uses this to check whether planning controls, such as heritage, apply.
- Asbestos in older homes must be identified and removed by appropriately licensed removalists before demolition.
- Services must be disconnected and abolished by the relevant authorities.
Other factors to weigh
- Where you live during the build and what that costs
- Stamp duty and moving costs if the alternative is buying elsewhere
- Timeframes: approvals plus construction for either path
- Home Warranty cover, which applies to eligible domestic building work over $20,000 from 1 July 2026
How AxisPro helps
We look at both options on the same site, with the same level of detail, so you are comparing like with like. That includes a planning check, a condition assessment of the existing house, and a clear view of the approvals each path needs.