Knockdown Rebuild vs Renovating a Townhouse: Which Adds More Value?

When you own an ageing townhouse in Melbourne, you face a pivotal question: renovate or knock it down and rebuild from scratch?

At Gidaya Group, we frequently help homeowners, investors, and developers assess this decision from a strategic, value-driven lens. Let’s explore both options to determine which delivers more upside in 2025.

1. Knockdown Rebuild: What Is It?

A knockdown rebuild (KDR) involves demolishing an existing townhouse and constructing a new home (or homes) on the same land.

It’s ideal for:

• Homes with structural damage or outdated layouts

• Sites suitable for dual occupancy or multi-unit development

• Maximising land value with contemporary design and higher density

2. Renovating a Townhouse

Renovation includes updating interiors, extending floorspace, or modernising facades. It’s popular in heritage suburbs or for owner-occupiers with budget constraints.

Gidaya Group often manages:

• Internal refurbishments (bathrooms, kitchens, flooring)

• Rear or upward extensions

• Facade refreshes for street appeal

3. Which Option Is More Cost-Effective in Melbourne?

Renovation Costs:

• Moderate upgrades (kitchen, bathroom, paint): $1,500–$2,200/sqm

• Major renovations or extensions: $2,500–$3,200/sqm

Knockdown Rebuild Costs:

• Demolition: $20,000–$35,000

• Rebuild: $2,600–$3,000/sqm (standard spec)

In many cases, a KDR becomes more cost-effective for sites needing extensive structural or layout changes.

4. Planning & Compliance

Knockdown rebuilds often trigger:

• New planning permits

• ResCode compliance

• Site investigations (drainage, soil)

Renovations may bypass permit requirements if works fall under ‘exempt development’. However, heritage overlays can restrict façade changes.

Gidaya Group handles both planning streams and can assess permit risks early.

5. Value Uplift Comparison

KDR unlocks higher rental yields and modern resale pricing. Renovations suit smaller budgets or short-term ownership.

6. Heritage & Overlay Considerations

In inner-Melbourne suburbs like Fitzroy, Carlton or Brunswick, overlays often restrict knockdowns. Renovating within these design controls may be your only viable option.

Suburbs with fewer overlays like Glen Waverley, Ringwood or Doncaster allow greater flexibility for knockdowns.

7. Gidaya Group Recommendation

• Choose Renovation if you want:

  • To preserve a classic façade or heritage aesthetic

  • Quick cosmetic updates for sale

  • Less disruption and lower upfront costs

• Choose Knockdown Rebuild if:

  • Your existing townhouse has poor bones

  • You want to develop multiple dwellings

  • You seek higher capital growth or rental yield

Final Word

There’s no universal answer. The decision to renovate or knockdown depends on the site, overlays, budget, and goals.

Gidaya Group’s planning and build teams can assess your specific site and provide cost-benefit insights to guide the right strategy.

Considering a rebuild or renovation in Melbourne? Get a tailored feasibility assessment from Gidaya Group today.