Knockdown-Rebuild vs. Renovation: Which Offers Better ROI in Melbourne in 2025?
Choosing between a knockdown-rebuild and a renovation is a significant decision for property owners looking to optimise returns on their real estate.
In Melbourne, these two approaches often lead to very different outcomes depending on a host of variables: the original condition of the property, local market expectations, and the owner’s financial goals.
Understanding the pros and cons of both can help you make the right choice for you.
When it comes to a knockdown-rebuild, one of the biggest advantages is the ability to start anew, and change the number and/or capacity of the home/s.
If your existing structure is outdated, has major structural issues, or simply does not fit modern preferences for layout and design, demolishing allows you to incorporate all the features that contemporary buyers and tenants desire.
You can create open-plan living areas, install energy-efficient systems, and ensure the building meets current building codes and safety standards.
This is particularly appealing if you are aiming to build multiple townhouses on a large block in Melbourne, as you can maximise the site’s development potential by tailoring each unit to the demands of the market.
Knockdown-rebuild townhouse projects also tend to yield higher resale values because the resulting homes are brand-new. Buyers who prioritise modern amenities often find newly built homes far more appealing than older, renovated properties.
With a knockdown-rebuild in Melbourne you need to account for demolition expenses, and also face the full cost of constructing from scratch. You’ll need to engage a designer, a builder, and possibly town planners to navigate council approvals – unless you hire a specialist design and construct team like delcon design and construct.
The advantage is that your costs are more predictable because there aren’t hidden surprises lurking behind old walls or outdated plumbing.
In many cases, owners opt for a knockdown when the renovation costs are projected to be almost as high as a full rebuild.
If the existing property has serious structural or foundational issues, those can be extremely expensive to fix, making a knockdown-rebuild more attractive and potentially more profitable in the long run.
Is a renovation the right approach?
A renovation might be more appropriate if the property is already in decent condition or if it possesses unique architectural features that add character and value. Certain older homes in Melbourne have a charm and heritage appeal that can be preserved and enhanced through thoughtful renovation.
Buyers looking for something with historical allure may be willing to pay a premium if the renovation skillfully merges modern conveniences with classic design. Renovations can also be done incrementally, allowing homeowners to spread costs out over time rather than dealing with one large expenditure all at once.
However, renovations often bring more uncertainty.
Tearing into old walls can reveal problems like water damage, pest infestations, or out-of-date electrical systems, all of which can blow out your budget. If you’re juggling a strict timeline or tight finances, these surprise expenses may derail your plans.
Furthermore, some areas in Melbourne with heritage overlays impose strict guidelines on renovation work, which can complicate the approval process and add extra costs.
You also won’t achieve the end result of more dwellings, which caps your return on investment.
In deciding, weigh market conditions, the property’s state, your budget, and your long-term goals. Some developers find that in suburbs where new builds are particularly sought after, a knockdown-rebuild can deliver a more substantial return. Others prefer renovating a property with strong “bones” and desirable period features to appeal to a niche buyer base – and forgo the additional ROI associated with building a townhouse or multi-unit development.
Ultimately, the best approach is to conduct a thorough cost-benefit analysis. Consult with experienced builders and real estate professionals who can help you assess the specific property and forecast potential returns.
At delcon design and construct, we can provide expert insights tailored to your goals.
Whichever path you choose, careful planning and a focus on quality will help ensure you maximise your ROI in Melbourne’s property market.
To get started on your Melbourne multi-unit or townhouse property development project, contact us today on 1800 335 266 or emal us at info@delcon.net.au.