Melbourne House Extension Cost & ROI Calculator
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Adding a room to your house sounds like a dream-more space, no moving, and maybe even a higher sale price. But in Melbourne, where land is tight and building rules are strict, is a house extension really worth it? Or are you just spending $80,000 to turn your living room into a noisy construction zone for six months?
What you actually get for your money
A typical single-storey house extension in Melbourne costs between $65,000 and $120,000, depending on materials, design complexity, and whether you’re adding a bathroom or just a bigger kitchen. A two-storey extension? That jumps to $150,000-$250,000. Those numbers don’t include council fees, structural engineering, or the cost of living elsewhere while it’s being built.
But here’s the thing: most people don’t extend for the joy of bricks and mortar. They extend because they need more space. Maybe the kids are growing. Maybe Grandma’s moving in. Or maybe you just hate cooking in a kitchen that’s smaller than your old apartment. The real question isn’t about square metres-it’s about whether the new space improves your daily life.
A 2024 survey by the Australian Bureau of Statistics found that 68% of homeowners who completed an extension said their quality of life improved “a lot.” The biggest wins? More natural light, better flow between rooms, and having a dedicated home office. Not a fancy kitchen island. Not a walk-in robe. Just space that actually works for how you live.
Does it increase your property value?
This is where the myth gets tangled. Many real estate agents will tell you an extension adds 100-150% of its cost back in value. That’s not true. Not in Melbourne.
According to CoreLogic’s 2025 data, a well-executed single-storey extension adds, on average, 60-80% of its cost to your home’s market value. A two-storey extension? Closer to 50-70%. Why? Because buyers aren’t paying extra for your personal taste. They’re paying for usable space that fits the neighbourhood.
Take a typical 1970s brick veneer home in Box Hill. It’s worth $1.1 million. You add a 40m² living area with a bathroom and sliding doors to the backyard. That costs $95,000. Post-extension, your home sells for $1.2 million. That’s a $100,000 gain. Sounds great, right? But you’ve only recovered 105% of your cost-after factoring in interest, stress, and lost rent if you moved out. That’s not a profit. That’s breaking even.
Now, if you’d spent that $95,000 on a full kitchen renovation and a new roof? You’d likely have seen a 120% return. Why? Because kitchens and roofs are universal needs. Extensions are personal.
Where extensions make sense
There are three scenarios where a house extension pays off more than it costs:
- You’re staying long-term - If you plan to live in the house for 7+ years, the emotional and lifestyle benefits outweigh the financial return. You’re not buying equity-you’re buying peace of mind.
- You’re extending into underused space - Converting a garage, adding over a carport, or extending into a neglected backyard corner costs less than building from scratch. You avoid new footings, drainage, and major site works.
- You’re adding a second storey on a narrow block - In suburbs like Fitzroy or Carlton, where land is scarce, vertical extensions are in high demand. Buyers pay a premium for homes that maximize small footprints. A two-storey addition here can add 75-90% of its cost to value.
One client in Richmond added a two-storey extension over their old detached garage. The garage was crumbling, and the backyard was unused. Total cost: $185,000. New value: $1.7 million. Previous value: $1.4 million. That’s a $300,000 gain. But here’s the catch: the extension was designed to match the original 1920s brickwork. The windows were the same size. The roof pitch matched. It looked like it had always been there. That’s the secret: it’s not the size-it’s the harmony.
Where extensions fail
Most failed extensions share the same mistakes:
- Overbuilding for the street - Putting a 100m² open-plan living area on a block with 80m² neighbours makes your house look like a monster. Buyers skip it.
- Ignoring natural light - A big extension with no windows on three sides feels like a cave. No one wants a dark, windowless family room.
- Skipping the council - Unapproved extensions show up on property reports. Buyers walk away. Or worse, you get fined $15,000 and have to tear it down.
- Choosing style over function - A glass-walled extension sounds cool until winter hits and your heating bill doubles. Thermal performance matters more than aesthetics.
One family in Doncaster spent $110,000 on a modern glass extension. They loved it… until the summer heat trapped inside and turned the room into a sauna. They ended up installing blinds, curtains, and a reverse-cycle system. The total cost ballooned to $150,000. They sold the house two years later. The extension didn’t add a cent to the value.
The hidden costs no one talks about
Most people budget for materials and labour. They forget the invisible stuff:
- Temporary accommodation - If you’re extending the kitchen or main living area, you’ll need to rent a unit or stay with family. In Melbourne, that’s $3,000-$6,000 a month.
- Utility upgrades - Adding a bathroom might need a new sewer line. A bigger kitchen might need a bigger gas line. These aren’t optional.
- Landscaping - A new extension often changes drainage, fencing, and access. You’ll need to regrade, replant, or rebuild a deck.
- Insurance - Your home insurance may not cover construction damage unless you notify them. Some policies require a temporary policy upgrade.
One builder in St Kilda told me: “I’ve seen 12 families go broke on extensions because they didn’t budget for the 18-month timeline. They thought it’d take 4 months. It took 9. Then the rain flooded the site. Then the plumber quit. Then the council asked for a structural review.”
Alternatives to an extension
Before you sign a contract, ask: is there another way?
- Reconfigure existing space - Knocking down a wall between the kitchen and dining room can feel like a 30m² extension. It costs $15,000-$30,000.
- Convert the garage - If it’s detached and in good shape, turning it into a studio, office, or guest room adds usable space without new foundations.
- Build a granny flat - In many Melbourne suburbs, you can build a 60m² secondary dwelling on the same block. It costs $160,000-$220,000, but it can be rented out. That’s cash flow while you live in the main house.
- Go vertical with a loft - If you have a high ceiling or attic space, adding a mezzanine level can create a bedroom or study without extending outward.
One couple in Hawthorn converted their double garage into a two-bedroom apartment with a kitchen and bathroom. They kept the driveway and used the space for storage. Cost: $110,000. Rental income: $550/week. They paid off the build in 3 years. Then they rented out the apartment and moved into the main house. No extension needed.
How to know if you should do it
Ask yourself these five questions:
- Will I still love this space in five years? - Trends change. A media room today might be a storage room tomorrow.
- Does this solve a real problem, or just a temporary annoyance? - If you’re tired of the kids running through the living room, maybe you need better routines, not more square metres.
- Is this the best use of my money? - Could you get a better return by upgrading the kitchen, insulation, or solar panels?
- Am I doing this for me, or for resale? - If it’s for resale, stick to neutral, functional designs. If it’s for you, go wild-but know you might not get it all back.
- Have I talked to three builders and one town planner? - Builders sell you dreams. Town planners tell you the truth.
There’s no magic number that says “yes” or “no.” But if you’re extending because you’re scared of moving, or because your in-laws are pressuring you, or because you saw a house on Instagram-walk away.
House extensions aren’t bad. They’re just not always the right answer. The best ones aren’t the biggest. They’re the ones that fit your life, your budget, and your street.
How much does a house extension cost in Melbourne in 2025?
A single-storey extension typically costs between $65,000 and $120,000, depending on size, materials, and whether you’re adding plumbing. Two-storey extensions range from $150,000 to $250,000. These prices include permits, labour, and basic finishes, but not temporary accommodation or landscaping.
Does a house extension increase property value?
Yes, but not as much as most people think. On average, a well-designed extension adds 60-80% of its cost to your home’s value in Melbourne. Two-storey extensions on narrow blocks perform better, sometimes reaching 75-90%. Extensions that clash with the neighbourhood or lack natural light add little to no value.
What’s the cheapest way to add space to a house?
The cheapest options are knocking down internal walls to open up space, converting a garage, or adding a loft in a high-ceilinged area. These cost between $15,000 and $60,000-far less than a full extension-and often provide similar benefits in terms of usable space.
Can I extend without council approval?
No. In Melbourne, all extensions require council approval under the Planning and Environment Act. Even minor additions over 10m² need permits. Building without approval can result in fines up to $15,000 and forced removal of the structure. Always check with your local council before starting.
Is a two-storey extension better than a single-storey?
It depends. Two-storey extensions cost more and are harder to build, but they’re ideal for narrow blocks where you can’t expand outward. In inner suburbs like Carlton or Fitzroy, buyers pay more for vertical space. In larger suburban blocks, a single-storey extension often blends better and costs less to build and maintain.
