Decide what is worth retaining
A renovation makes sense when the existing structure, orientation and floor plan give you a strong base for the result you want. A knockdown rebuild becomes more compelling when major structural work, widespread service replacement and extensive reconfiguration would still leave important compromises.
Ask a designer or builder to assess the existing home before assuming either path. The condition of foundations, framing, roof, waterproofing and services can change the comparison significantly.
Compare risk and design freedom
Renovations carry more uncertainty because concealed conditions are uncovered during construction and new work must connect to old. They can preserve character and reduce the amount demolished, but additions may inherit existing level, structural and orientation constraints.
A rebuild offers a clean design brief and coordinated new construction, subject to current planning, site and budget limits. It also adds demolition and temporary accommodation to the program and can require more decisions before construction starts.
Build a whole-project comparison
For both options, include design, investigations, approvals, construction, service upgrades, external works, temporary accommodation and contingency. For a rebuild, add demolition and reconnection costs. For a renovation, allow for concealed conditions and the cost of protecting retained areas.
Compare the completed layout and long-term usefulness as well as the project cost. A cheaper pathway may offer poor value if it cannot solve the space, comfort or circulation problems that prompted the project.