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There has been a significant shift in Australia's homeownership market in recent years, as I'm sure you've noticed. Gone are the days of 2.4 children and the white picket fence. Nowadays, more and more are choosing to invest in townhouses instead, and there are many reasons why.

The most notable is their relative affordability compared to houses and a shift in demographics- people are having children older, having less of them, and prioritising a low maintenance lifestyle with closer proximity to amenities and the workplace.

But are townhouses a good investment?

As well as your overarching investment strategy, your plans for the house will decide whether you choose to make your investment here (as opposed to a house or an apartment).

This blog will walk you through its pros and cons.

Pros:

The cost

We've already touched on this in our introduction, and it's the key driver in the decision-making process for many property investors.

Townhouses are generally cheaper than houses, making them a popular and affordable entry point into the market for young families, professional singles or couples, and downsizers.

They offer a favourable trade-off between the benefits of a house and an apartment- cheaper than detached houses but bigger than apartments.

Lower up-keep

The smaller size of a townhouse compared to a house is reflected in its lower maintenance costs. Their yards are often simpler and smaller too- cost-savings that add convenience and appeal, especially if you plan on listing on the rental market.

Market appeal for tenants

We have touched upon some of these points above: the lower maintenance, proximity to amenities and modern designs of townhouses attract quality tenants and give the properties high tenant market appeal.

Of course, local markets can vary, so you still need to do your homework on their respective supply and rental rates.

Common property depreciation

Townhouse investors can claim depreciation on a property and its assets: the structure, fixed assets and other assets they own in the property, i.e. kitchen appliances. Everyday property items can be claimed for too- such as garbage bins, security cameras and any driveways that link the townhouses.

Privacy

Although they often now come with common amenities (swimming pools, parks etc.), they don't have any shared living areas, so they boast much of the same privacy of the house.

Space

Townhouses are often split into 2 or 3 floors, offering more space than most apartments.

Modern amenities

With the explosion in their popularity as a relatively modern development, most come with the trappings of modern conveniences, such as ensuite bathrooms and open-plan living.

More relaxed bylaws

While townhouses still need to adhere to local bylaws, these do tend to be more relaxed than those for apartment buildings, and it's less likely you will have to pay body corporate fees.

Cons:

You're part of a strata scheme

As part of a strata scheme, there are restrictions on how you can update the property- you'll need to get any improvements approved first. However, this isn't so much of an issue if you are investing as a rental property, as simple repairs are usually fairly plain sailing through the strata approval process.

Lower rental returns

Townhouses often have lower rental yields than freestanding homes, though the lower purchase price and maintenance costs counterbalance this. Still, it would be best to size up these factors when choosing where to invest.

Resale values

Historically, the capital growth of freestanding houses exceeds those of townhouses. Though these market waves are also subject to fluctuation, so there are other things to bear in mind before you invest- specifically, where these lie when you are looking to buy.

Space

Townhouses usually have smaller square footage and outdoor space than freestanding houses.

Price

Although cheaper than a detached house, townhouses are often more expensive than apartments.

Less individuality

The nature of townhouses means they are often built with the same layout and design as neighbouring buildings and are less bespoke than a house.

Stairs

Usually over 2 or 3 floors, townhouses may not be best suited for the elderly or people with mobility issues.

Conclusion:

Whether a townhouse is the best investment property for you will depend on several factors, such as your budget, what you want from the investment (rental yield or capital growth), if you are planning to be owner-occupiers or landlords, and current property market conditions.

But with the changes in the composition of society, our habits and our demands, their popularity as living spaces certainly show no signs of abating.

If you do choose to make your investment in a townhouse, here are a few things you should prioritise:

1. Proximity to local retail, public transport, schools, and parks.
2. Versatile floorplans that cater for downsizers, families, or young professionals.
3. A design that lets in lots of natural light to living spaces and bedrooms.
4. Lots of storage space and options.
5. What common facilities it has, and whether they appeal to you or prospective tenants.
6. Whether the type of title (strata, community or freehold) suits your investment needs.

A final word of advice is to check whether the advertised price of the house and land packages is up to 'turn-key' standard, to ensure there are no hidden surprises and extra costs with landscaping etc.

Building a custom house in Melbourne costs $2,700 to $6,900 per square metre in 2026. These are late-2025 rates, and they don't include GST, land, professional fees, or site works.

The official benchmark sits much lower. The Australian Bureau of Statistics puts the average new house in Victoria at $485,292 in 2024–25, with an average floor area of 253.5 m². It covers every new house in the state, from fringe packages to architect-designed homes.

The gap between those two numbers is the real story of building in Melbourne. Where your home lands within it depends on your block, your design, and the decisions you make before construction starts.

What does it cost to build a house in Melbourne per square metre?

Building a house in Melbourne costs about $2,050 to more than $8,700 per square metre. That runs from a simple project home to an architecturally designed residence. Rider Levett Bucknall (RLB) puts custom-built homes at $2,700 to $6,900, across the middle and upper tiers.

BMT Quantity Surveyors publishes 2026 rates by build tier for Sydney, and states that Melbourne builds run at 92–105% of those rates. Applying that adjustment gives the Melbourne ranges below, on a 250 m² home, close to the Victorian average of 253.5 m².

Source: BMT Construction Cost Table, 2026, Sydney rates adjusted to BMT's Melbourne range of 92–105%. All rates are per square metre of floor area and exclude GST.

Both RLB and BMT price the building contract only. Add 10% for GST, then land, professional fees, site works, drainage, landscaping, and loose furniture.

That GST adjustment matters when you compare sources. Quantity-surveyor rates exclude GST, but ABS figures include it. Compare the two without adjusting, and your budget will be out by about 10%.

What does the average new house cost in Victoria?

The average new house in Victoria cost $485,292 in 2024–25, up 12% in a single year from $433,431. Only the ACT rose faster.

Source: ABS Building Activity, Australia, December 2025 release

Divide the average cost by the average floor area, and the Victorian figure works out to roughly $1,900 per square metre, including GST. That is below even the entry rate for a custom-built home.

The reason is the mix. The ABS average is dominated by volume-built homes on greenfield estates, built from standard plans on flat, cleared lots. It tells you little about a bespoke home on an established block in the inner east or bayside.

The ABS value does include site preparation, but it excludes land and landscaping.

Prices are still rising, though more slowly in Victoria than elsewhere. Victorian house construction prices rose 3.7% in the year to June 2026, the smallest rise nationally, according to the ABS. Nationally, the rise was 5.9%.

What does a custom home in Melbourne cost in total?

Rider Levett Bucknall (RLB) prices a custom-built Melbourne house at $715,000 to $2,375,000, before GST. That's the building alone, not the project around it.

To see how size and specification combine, here is what RLB's custom-built rate gives at three common sizes. The figures exclude GST.

Source: RLB Riders Digest Melbourne 2026, rates at fourth quarter 2025

Building services are a meaningful share of that total. RLB puts electrical, plumbing, mechanical, and fire services for a Melbourne custom-built home at $272 to $909 per square metre.

What sits outside the build price?

Build rates cover the house alone, so a complete project budget also has to carry these costs:

• GST on the building contract
• Land, if you don't already own your block
• Architectural, engineering, and consultant fees
• Site works and drainage beyond the building footprint
• Planning and building permits
• Landscaping, driveways, and fencing
• Loose furniture and window furnishings
• Contingency

Land costs in Melbourne

On new estates, Greater Melbourne's median lot price was $405,375 in 2025, up just 0.7%, according to UDIA's State of the Land 2026. The median lot measured 360 m², the smallest in Australia for the fifth year running, at an average of $1,128 per square metre of land.

Land is a separate cost, and in Melbourne it varies far more than the build itself.

Established inner and middle-ring suburbs are priced by scarcity, not by estate release. There, land can cost more than the house built on it. If you already own your block, that cost sits behind you, and the build budget is where the decisions are.

Site costs

Site costs cover everything needed to prepare your block for construction:

• Land survey and soil testing
• Excavation and retaining walls
• Stormwater drainage
• Connection to water, sewer, power, and gas

Every site is different. A sloping block, a tight allotment in an established suburb, or difficult soil can all push site costs up significantly. Rider Levett Bucknall excludes site works and drainage from its build rates for exactly this reason.

Get the site assessed before the design is finalised. A sloping or difficult block isn't a reason not to build. It just needs designing for from the start, not pricing in at the end.

Design and consultant fees

Design fees sit outside the building contract, and on a custom home they're substantial. Australia has no standard fee scale. Fees are negotiated, says the Australian Institute of Architects, and depend on service level and complexity.

Ask for a written fee proposal before you commit, and expect engineering, energy rating, and other consultants to add to it. Our guide to architect-designed home costs explains how those fees are structured.

Full service usually spans:

• Concept design
• Documentation
• Planning and building approvals
• Tender support
• Contract administration through construction

Where design and construction sit in one business, the fee structure works differently. Costing happens alongside design rather than after it. That reduces the risk of a fully documented design coming back over budget at tender.

Permits and council costs

Planning permits, building permits, and council application fees add to your total. The amount depends on your council, the scale of the project, and whether you need a planning permit as well as a building permit.

They are predictable in type but variable in amount, so budget for them from the start rather than out of contingency.

Contingency

Contingency is an allowance for unforeseen costs, such as design changes or inflation. Victoria's building regulator gives 10–20% of the total cost as a general rule of thumb. On a $1.5 million build, that's $150,000 to $300,000 set aside.

The right figure depends on how resolved your design is. A fully documented, fully priced design needs less. A design still at concept stage, or a block with unknown ground conditions, needs more.

What pushes the cost of a Melbourne custom home up?

The biggest cost drivers are the number of storeys, the footprint, roof, a sloping block, wet areas, finishes, and energy requirements. Design complexity can add significant cost before you've registered where it went.

Single-storey vs double-storey

A single-storey home is generally cheaper to build per square metre than a double-storey. There's less scaffolding, simpler engineering, and no stairs or upper-floor structure. On a smaller Melbourne block, though, building up is often the only way to fit the floor area you want.

Footprint and roof form

A compact rectangle is cheaper to build than an L-shape or U-shape. It has fewer external corners, a simpler roof, and a simpler structure.

A simple gable or skillion roof costs less than a complex hipped roof with multiple intersections. Every valley and change in pitch adds labour, material waste, and another junction that needs flashing.

Sloping and difficult blocks

Many established Melbourne suburbs have sloping or irregular blocks. Building on them means more excavation, retaining, and structural work, and often a split-level design. The cost is real, but a well-designed home can use the slope for views, light, and separation between living zones.

Kitchens, bathrooms, and finishes

Bathrooms and kitchens carry the highest cost per square metre in the house. Each wet area adds waterproofing, plumbing, tiling, and joinery. A home with four bathrooms and a butler's pantry costs more to build than one of the same size with two.

Finishes move the figure most at the top end. Stone, custom joinery, imported tapware, and architectural glazing separate a custom home from a project home. Know your non-negotiables and put the budget there.

Energy-efficiency requirements

Since 1 May 2024, new Victorian homes must meet a 7-star energy efficiency standard, up from 6 stars, under the National Construction Code 2022. The code also added a Whole of Home energy use budget covering fixed appliances such as heating and cooling, hot water, and lighting.

Both requirements shape glazing, insulation, orientation, and appliances from the first design stage. Getting orientation right early is far cheaper than fixing it later with upgraded glazing and services.

How much house does $1 million build in Melbourne?

At Rider Levett Bucknall's entry rate of $2,700 per m² for custom-built homes, $1 million buys around 335 m² once GST is added. At the midpoint of RLB's range, about $4,800 per square metre, it buys closer to 190 m².

That's construction only. A $1 million total project budget, excluding land, also has to cover design fees, site works, permits, landscaping, and contingency. Once those come out, it supports a smaller home again.

The budget stretches further in three ways:

1. Keep the floor plan simple, since every corner and roof intersection adds cost.
2. Limit wet areas to the ones you'll actually use.
3. Resolve every selection before signing, since changes during the build cost more.

Can you build a custom home in Melbourne for $600,000?

Not comfortably. At Rider Levett Bucknall's entry rate of $2,700 per m², $600,000 including GST buys around 200 m² of construction. That's before design fees, site works, permits, or contingency, which together can take a substantial share of the budget.

The Victorian average is $485,292. That mostly reflects volume-built homes on the urban fringe, not custom builds on established blocks. A budget around $600,000 is better suited to a project-home builder's standard range than to a bespoke design.

If $600,000 has to cover land as well, a new house in an established Melbourne suburb isn't realistic.

FAQ

How long does it take to build a custom home in Melbourne?

A new house in Australia takes about 11.5 months on average from building approval to completion, including 9.2 months of construction. There's no official average for Melbourne itself.

That clock starts at building approval, so the time spent on design and any planning permit comes on top. A custom home on an established block usually takes longer, as design, documentation, and approvals are more involved.

Does the ABS average cost include land?

No. The ABS states that the value of building work includes site preparation but excludes land and landscaping. The 2024–25 average of $485,292 for Victoria is construction only.

Is it cheaper to build in Melbourne than in Sydney?

Usually, slightly. BMT puts Melbourne building costs at 92–105% of Sydney rates. 

Rider Levett Bucknall puts Melbourne custom builds at $2,700 to $6,900 per square metre. That's a higher floor than Sydney's $2,500 to $7,600, but a lower ceiling. Land is the bigger difference between the two cities.

What contingency should I budget for when building?

Victoria's building regulator gives 10–20% of the total cost as a general rule of thumb. The right figure depends on how resolved your design is. The more of the design that's documented and priced before you sign, the less contingency you need.

What this means for your build

Cost per square metre is a starting point, not an answer. The rate you're quoted reflects one tier of build and one scope of work. Your total depends on the block, the design, and the decisions made after signing.

Where design and construction sit in one business, pricing happens as the design develops. You find out what a decision costs while you can still change it. Test the site before you commit, know what your quote leaves out, and hold contingency from the start.

Want a rough figure for your own build first? Try our cost calculator.

Riser designs and builds premium, bespoke custom homes across Melbourne. This includes new custom builds and selected dual occupancy projects. 

Book a consultation with our team to get a clear picture of what your site, your brief, and your budget can achieve.

It takes an average of 9.2 months to build a new house in Australia from the start of construction to the end. This number comes from the ABS Building Activity Survey for the financial year 2024–25. If you count from the day approval comes through rather than the day the excavator starts, it's 11.5 months.

Building a new detached house takes 35.8% longer than it did a decade ago, according to a Master Builders Australia analysis of ABS data.

Custom homes take longer, typically 18 to 24 months from initial consultation to handover. The extra time goes into early design, documentation, the approval process, and pre-construction planning. None of the figures above cover those early stages.

What is the average build time for a house in Australia?

According to the ABS Building Activity Survey, it takes an average of 9.2 months to build a detached house. When you add the 2.3 months between approval and commencement, it brings the total to 11.5 months.

These are national averages for new detached houses, so individual projects may take more or less time. A custom home may take even longer.

Here's how the 2024–25 averages are broken down by dwelling type:

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* ABS publishes flat, unit and apartment timelines for NSW, Victoria and Queensland only.

Source: ABS Building Activity, Australia, June 2025

These figures do not cover the full homeowner journey before approval, which includes:

• Choosing a site
• Early design
• Finance
• Preparing an application

Why does it take so long to build a house?

Between 2020 and 2025, the time to build a house increased by 34% across Australia, according to the Institute of Public Affairs. The last few years brought some improvement, but times remain well above pre-2020 levels.

Several factors contribute to longer build times, including:

• Trade availability
• Material supply chains
• Design complexity
• Site conditions

Trades are stretched thin

Subcontractor availability is one of the biggest bottlenecks in residential construction right now. Framers, concreters, electricians, and plumbers are in high demand across every state. Lose a week on framing and every trade behind it shifts a week too.

Material supply chains

Post-pandemic supply chains have mostly recovered. However, lead times on some materials are still longer than they were before 2020. This is especially the case for windows, joinery, and engineered structural products.

For custom homes with unique specs, this matters more than it does for a volume build that uses standard off-the-shelf components.

Design complexity

A custom home needs more design iterations and engineering coordination. It also needs more detailed documentation than a project home pulled from a catalogue. 

That extra time upfront is not wasted. It prevents costly variations during construction, but it also adds weeks to the pre-construction phase.

Site conditions

A difficult site adds time and cost to the early structural stages. A steep slope needs retaining, cut-and-fill, or a stepped footing design. Reactive clay soil calls for a stiffer slab and deeper footings. A high water table can mean dewatering during excavation.

Unlike weather, these can be established upfront. A soil test and site survey during design will tell you what you're dealing with, which is why they happen before the slab is engineered. The cost lands in the early stages either way, but a site investigated properly doesn't produce surprises mid-build.

What are the main stages of a custom home build?

A custom home build runs through 5 main stages:

1. Design
2. Approvals
3. Pre-construction
4. Construction
5. Handover

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These durations are indicative for custom homes and reflect typical project experience. Construction on a custom home often runs longer than the 9.2-month national average for new houses. This is due to more complex design, engineering, and detailing. 

Where no planning permit is required, approvals are usually at the shorter end of the range. Stages can overlap, and few projects hit the best or worst case at every stage. That's why 18 to 24 months is a realistic overall planning range rather than the sum of the extremes above.

Design and documentation

Design and documentation is where the house takes shape on paper, before a single sod is turned. Your architect or designer produces:

• Drawings
• Engineering plans
• Energy reports
• Specification documents

For a bespoke custom home, this stage typically takes 8–16 weeks. Rushing usually costs more than it saves. Every decision you put off here becomes a variation later, and variations cost time and money.

Council or certifier approval

Council or certifier approval starts once your documentation is complete and plans are lodged. In Victoria, most residential builds go through a building permit process. More complex sites may also need a planning permit, which adds time.

Straightforward building permits can be issued in a few weeks. Planning permits can take months.

Pre-construction and site preparation

Pre-construction and site preparation is the handoff from paperwork to dirt. The builder:

• Locks in subcontractor schedules
• Orders long-lead materials
• Sets up the site

For a knockdown-rebuild, demolition happens here. It's typically a one-to-two-week process.

Site setup, temporary fencing, and service connections follow before the first concrete is poured. This is also where the official clock starts. 

Construction

Construction is the main event. A custom home in Melbourne typically progresses through 6 key milestones:

• Slab and footings: The concrete slab is poured and cured, and the footing is completed.
• Frame: The wall and roof structure is erected.
• Lock-up: External cladding, windows, and doors are installed, making the home weatherproof.
• Fitout (rough-in): Internal linings, plumbing, and electrical rough-in are completed.
• Fixing and finishing: Tiling, joinery, cabinetry, painting, and fittings are installed.
• Practical completion: Final trades, cleaning, and defect rectification are done.

Final inspections and handover

Final inspections and handover happen before you get your keys. A building surveyor conducts a final inspection and issues an Occupancy Permit. Any defects found during the handover walk-through are fixed before settlement.

Your builder then hands over warranties, maintenance manuals, and compliance certificates.

How long does a custom home take to build in Victoria?

A custom home in Victoria takes roughly 10–16 months on site, from the first work on the block to completion. The total journey, from the first design conversation to moving day, is typically 18–24 months. Complex projects can run longer. 

That construction range sits above the 7.9-month Victorian average for new houses. Custom homes carry more bespoke detailing, and that detailing takes time to build, not just to draw.

Volume project homes can be faster. The builder has often delivered the same design many times. Materials are ordered in bulk, and subcontractor schedules are more repeatable. 

A custom home is different by definition. The design is yours, the details are yours, and the process is more considered at every stage.

How long does it take to build a house in NSW?

Build times in NSW sit slightly above the national average. House building takes about 12.3 months from approval to completion, compared with 11.5 months nationally. Sydney's planning system also adds complexity for some sites.

A private certifier can approve straightforward complying development in as little as 20 days. Under the NSW Housing Pattern Book pathway, eligible designs on qualifying lots can be approved in 10 days.

Lodging a development application with council is slower. NSW Planning's own benchmark flags councils taking 90 days or more. Some metropolitan councils average well beyond that. 

For inner-city or heritage-affected sites, it can take considerably longer.

The on-site construction sequence follows a similar path to Victoria. However, NSW records a longer average timeframe overall.

How long does it take to build a house in South Australia?

South Australia sits among the slower states nationally. Approval to commencement averages 3.6 months. It's the longest of any state and well above the 2.3-month national average.

SA was the biggest improver in FY2025, cutting construction times by 16% from 12.1 months to 10.1 months. That brings SA's total from approval to completion to about 13.7 months, above both the 11.5-month national figure and NSW's 12.3.

How fast can a builder build a house?

The fastest a production builder can finish a simple, single-storey project home on a flat block is commonly quoted at around 4 to 5 months. That assumes no variations, no weather delays, and no trade conflicts. 

That timeframe covers the construction phase alone. It's a best-case result rather than a reliable expectation for most builds.

For a custom home, speed is not really the goal. The goal is a home built properly, with quality materials, quality trades, and no corners cut. Where a program is compressed, the risk shifts to finish quality and defect rectification after handover.

What causes build delays, and can you avoid them?

Most delays fall into three categories:

1. Variations during construction
2. Approvals taking longer than expected
3. Weather

Knowing these upfront lets you build in a real contingency rather than get caught off guard.

Variations during construction

A variation is any change to the approved plans or specifications after you sign the contract. Even small ones push other trades back. For instance, a different window size, a relocated power point, or a change to the kitchen layout.

The best way to minimise variations is to make every decision during the design phase, not during the build.

Approvals taking longer than expected

Planning and building permit timeframes are set by councils and certifiers, not by your builder. Your site may have overlays, easements, or design elements that need extra assessment. In that case, the approval process can take much longer than a standard application. 

Ask your builder which approval pathway applies to your site before you commit to any timeline.

Weather

Weather is the one factor nobody can control. Concrete cannot be poured in heavy rain, and framing slows in extreme heat. Wet ground delays excavation and can stall site works entirely for days at a time.

Because it's unpredictable, the only real defence is a program with a buffer built in. This is a schedule that assumes perfect conditions will slip, and that allows for lost days to be absorbed. 

Ask whether your builder's program accounts for weather, and what the contract treats as a qualifying delay.

How does a two-storey house compare to a single-storey build?

A two-storey home takes longer to build than a single-storey home of similar floor area. This is because:

• The frame is more complex.
• The roof structure involves more coordination.
• Trades working on upper floors need extra scaffolding, safety setups, and access management.

The difference is not dramatic, but it is real. Expect to add weeks rather than months for a well-run two-storey project.

What to ask your builder before you sign

Before committing to a building contract, get clear answers to these questions:

• What is the construction program? Ask for a stage-by-stage schedule with milestone dates, not just a completion date.
• What approval pathway applies to my site? Ask whether you need a building permit only or a planning permit as well, and how long each is expected to take.
• What does the contract say about delays? Understand what constitutes a qualifying delay and what your rights are if the program slips significantly.
• Who manages subcontractor scheduling? Ask whether scheduling is handled in-house or by a contract supervisor, and who you contact when a trade doesn't show up.
• What happens if material lead times blow out? Ask whether key materials are ordered at contract stage or later.

About Riser

Riser designs and builds premium, bespoke custom homes across Melbourne, including new custom builds and selected dual occupancy projects. Every build comes with a construction program that is transparent from day one. Book a consultation to walk through your site, your brief, and a realistic timeline for your specific project.

Every build comes with a construction program that is transparent from day one. Cost works the same way. You can get a rough figure for your own build with our cost calculator.

A knockdown rebuild is worth considering if your home has major structural issues or costly layout problems. It also may be a better choice when renovation costs approach or exceed the cost of a new build.

Renovation is a well-suited option for a home with a good structure. It can also be a good idea if the changes are cosmetic or limited to specific rooms. You may also prefer to renovate if you want to keep character features you already love.

Neither option is universally cheaper or better. One demolishes the existing house and builds new on the same block; the other works within what's already there. The right choice depends on your home's condition, site, budget, and long-term goals. 

Is it better to do a knockdown rebuild or renovate?

A knockdown rebuild beats renovation when the existing home is working against you. This includes structural, functional, or financial problems. Renovation is better when the structure is solid and your wish list is achievable without major work.

Every project is different, but these are some of the main trade-offs to consider.

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What does a renovation actually cost?

Archicentre Australia's 2026 guide estimates renovation work inside an existing building at $1,600–$3,900 per square metre. Extensions are priced as new construction, at $2,700–$5,100 per square metre.

Renovation costs vary considerably with the size of the home, the scope of work, site access, and the materials you choose. Here are some indicative costs:

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Source: Archicentre Australia Cost Guide 2026. Figures include GST and assume standard materials and good site access. Renovation rates assume no structural upgrades. Extension rates cover the basic shell only, so add the kitchen, bathroom, or laundry fit-out on top.

Cosmetic work such as painting, flooring, and replacing fixtures generally sits at the lower end of the scale. Costs rise when a renovation involves:

• Structural changes
• Premium finishes
• Upgrades to plumbing and electrical systems

Archicentre's figures assume the renovated rooms are structurally sound. Make sure to budget any structural upgrades separately.

Existing homes can also reveal work that was not included in the initial estimate. Consumer Affairs Victoria recommends preparing a detailed estimate. It also advises allowing an additional 15% for unplanned costs.

What does a knockdown rebuild add to the cost?

A knockdown rebuild adds demolition and council approval costs before building starts. In Victoria, demolishing a house requires a building permit, according to the Building and Plumbing Commission. You may also need council consent or a planning permit, depending on the property and the proposed work.

Older homes may also need to be assessed for asbestos before demolition, according to Asbestos Victoria. Homes built before 1990 are more likely to contain asbestos. It's important to test and remove suspected materials safely. 

You'll also need to budget for utility disconnections and the demolition itself. These costs vary by property size and condition. That being said, they're real and need to be in your budget from day one.

A new home must meet current energy-efficiency standards, according to the Victorian Government, and comes with statutory warranties. It also avoids hidden problems within the old house, although site issues may still arise.

What devalues a house the most?

Poor layouts, structural problems, outdated services, and weak street appeal all make a home harder to sell.

Poor layout

A poor layout can make a home less practical and less appealing to buyers. Common problems include:

• Bedrooms opening directly onto living areas
• Kitchens disconnected from living or outdoor spaces
• Bathrooms you can only reach through a bedroom

Poor flow can be difficult and expensive to fix. Structural problems, outdated services, and poor street appeal may also put buyers off.

Structural problems

Foundation movement, rising damp, and roof damage can be expensive to repair and may deter buyers. Cosmetic improvements will not add lasting value if the underlying problems remain.

Outdated services

Old wiring and drainage can add to future repair or replacement costs. Poor insulation and inefficient heating or cooling can also make a home less comfortable and more expensive to run.

A Home Energy Rating Certificate rates a home's energy performance, factoring in features such as:

• Insulation
• Heating and cooling systems
• Window orientation
• On-site energy generation and storage

Poor presentation relative to the street

A tired exterior may look out of place among well-maintained or renovated homes. If the issue is mainly cosmetic, targeted improvements could be more practical than rebuilding. However, the cost and effect on value will depend on the property.

Renovation costs do not always translate into an equal increase in property value. This is particularly the case when the work involves extensive structural or layout changes.

A knockdown rebuild may offer better value in some cases. But the result depends on the build cost, block, location, and sale prices of comparable homes nearby.

When is a knockdown rebuild worth it?

A knockdown rebuild may be worth considering when you love your location, but the existing home no longer meets your needs. Your house might be too small, structurally compromised, or difficult to adapt. In that case, rebuilding can offer more flexibility than a major renovation.

The right choice still depends on your budget, the home's condition, site constraints, and local planning rules. Three situations may tip the decision towards a rebuild.

1. The renovation would cost more than building a new home.
2. The layout is fundamentally wrong.
3. You want to maximise the block.

At the top of Archicentre's renovation range, $3,900 per square metre, you pay more than the $2,700 starting point for new construction. Add kitchens, bathrooms, and services upgrades, and the total climbs quickly. At that level, it may be worth comparing costs and outcomes with a new build on the same block.

Some homes have a floor plan that is very hard to fix without removing much of the existing structure. If you are keeping mainly the slab and a few walls, you are close to a rebuild anyway, but still paying renovation rates.

Some sites allow for dual occupancy or a larger, better-placed footprint than the current home. A knockdown rebuild lets you take fuller advantage of that. Renovating within the existing envelope may limit how far you can go.

When does renovation make more sense?

Renovation may make more sense when the home is structurally sound and you only need to change specific things. It may also be the more practical option where heritage controls restrict demolition. Check the planning rules before committing to either approach.

Three situations may favour renovation:

1. You value the home's character
2. Your scope is limited and clear
3. You want to minimise time away from home

Original timber floors, pressed-metal ceilings, and bay windows can be difficult and expensive to reproduce. Renovation allows you to keep the features you love while improving the parts that no longer work.

If you only need a new kitchen, another bathroom or a refreshed exterior, renovation may be faster and cheaper than rebuilding.

A knockdown rebuild requires you to live elsewhere during construction. Smaller renovations may allow you to remain at home. However, major or staged works can still cause considerable disruption.

What actually devalues a knockdown rebuild property?

A knockdown rebuild doesn't automatically deliver a strong financial return. Its value will depend on the design, build quality, total project cost, and how well the finished home suits its local market. Key risks include:

• Overcapitalising for the area
• Choosing finishes that do not suit the market
• Overlooking orientation and passive design
• Choosing the wrong builder

If the total cost of the property and rebuild exceeds what comparable completed homes sell for, you may not recover the difference at sale. Check recent comparable sales before setting the budget.

Spending heavily on features buyers may not value can limit the return on your investment. The same applies to selecting finishes below local expectations.

Good orientation can improve comfort and reduce heating and cooling needs. At the same time, energy efficiency is an important consideration for many buyers and renters.

To prevent choosing the wrong builder, you can:

• Check that the builder is appropriately registered
• Review recent work
• Speak with previous clients and make sure the contract spells out the plans, specs, price, and how variations are handled

Is it cheaper to do a knockdown rebuild or renovate?

Neither knocking down nor renovating is reliably cheaper. If renovating to get the result you want costs close to a full rebuild, price both properly.

A knockdown rebuild may offer better value because it provides a new structure designed to current requirements. It also removes many of the uncertainties associated with working around an existing building. Unexpected costs can still occur, including:

• Demolition
• Ground conditions
• Permits
• Temporary accommodation
• Site works 

Renovation is generally cheaper when the scope is limited. For example, cosmetic improvements or targeted room upgrades that do not require major structural work. However, the cost depends on the finishes and condition of the existing home.

Price is only part of the decision. Compare the finished renovation with a new home on layout, running costs, upkeep, and character. Also consider which option is more likely to meet your needs without overcapitalising.

FAQ

Can I stay in my home during a knockdown rebuild?

You can't stay in your home during a knockdown rebuild. The demolition and construction process requires you to vacate entirely. Most families rent for the duration of the build, which adds to the overall project cost and needs to be budgeted from the start.

Do I need council approval to knock down my house?

In Victoria, you'll usually need a building permit from a registered building surveyor to demolish a house. You may also need a planning permit from your council if the property has heritage, vegetation, or other planning controls on it. Check the property's planning rules and talk to the council before you start.

What happens to my mortgage during a knockdown rebuild?

Your lender may restructure or refinance your mortgage into construction finance for a knockdown rebuild. Speak with them before arranging demolition, because they will need to assess the project.

Construction funds are generally released in stages as work progresses. The exact arrangement will depend on your equity, borrowing capacity, and lender requirements. 

Where Riser fits in

Get a real price for both options and check comparable sales before you commit. If a new home turns out to be the right answer, Riser designs and builds premium, bespoke custom homes across Melbourne, including new custom builds and selected dual occupancy projects. Every home is designed from scratch for the block and the family. We build for the life you actually want to live.

If you're still weighing up the numbers, try Riser's cost calculator to get a sense of what a new home on your block might cost.

Get in touch with Riser to book a consultation and talk through your block, your goals, and what's actually possible.