Renovate, rebuild or move? What the 2026 rule changes actually mean

The three things that changed

None of these made the news as property stories. All three change what a decision costs, and all of them landed in the last three years.

• December 2023 — small second homes. Amendment VC253 removed the planning permit requirement for a second dwelling of 60 square metres or less on the same lot as an existing house, across most residential and rural zones. Amendment VC282 refined it again in September 2025.
• July 2025 — a new regulator. The Building and Plumbing Commission took over from the Victorian Building Authority, absorbing it along with Domestic Building Dispute Resolution Victoria. One body now handles regulation and disputes.
• January 2026 — vacant land tax widened. Vacant Residential Land Tax now reaches unimproved land in metropolitan Melbourne that has sat undeveloped for five years, and the five years are counted backwards from December 2020.

Read together, they push in one direction: holding land and doing nothing got more expensive, and improving what is already standing got easier.

Sitting on a block is no longer free

The old play in an inner or middle-ring suburb was to buy something tired, sit on it while the land appreciated, and develop later when the numbers looked better. From 1 January 2026 that has a running cost attached.

Vacant Residential Land Tax now captures unimproved metropolitan land left undeveloped for five years — and the clock was not started fresh in 2026. It counts back to December 2020, so land that has been empty since then is already at the five-year mark.

Land where a build or a renovation is actually under way is not caught by this particular rule, and neither is land that already has a residence on it. There is Commissioner discretion where the delay has an acceptable reason — planning delays, infrastructure constraints, hardship — but discretion is not a plan.

The practical effect for an ordinary owner is small but real: the knock-down-and-wait option now carries a holding cost that the renovate option does not.

Granny flats got much easier — and the fine print is where the money is

This is the change with the most genuine upside for a normal household, and it is worth understanding properly rather than from a headline.

A small second home in Victoria is a dwelling of 60 square metres or less, containing a kitchen, bathroom and toilet, on the same lot as an existing house. In most residential and rural zones you no longer need a planning permit for one. You do not have to provide a car space.

Four pieces of fine print decide whether it makes sense:

• A building permit is always required. Removing the planning permit did not remove the building permit, and the building permit is where waterproofing, plumbing and electrical compliance are actually enforced.
• It cannot connect to reticulated natural gas. The kitchen is all-electric by law — induction or electric cooktop, electric hot water. That is not a problem, but it has to be designed in, not discovered.
• You cannot subdivide it or sell it separately. It is accommodation or rental income, not a second title. Anyone modelling it as a capital play has the wrong model.
• Lots under 300 square metres in certain zones still need a permit, and some overlays bring the requirement back. Check your council's planning property report before you commit to anything.

We wrote the rules out in full, along with what the wet areas cost, on our granny flat page. And if the existing house is the one from before 1990, read what a strip-out finds first — it is the most common reason a renovation price moves after the contract is signed.

Where that leaves the house you already own

Put the three changes side by side from the position of someone who already owns a Melbourne house.

• Moving costs stamp duty, agent fees and the moving itself before you have improved anything — and you inherit someone else's bathroom.
• Knocking down and rebuilding means a planning process, a long build, somewhere else to live meanwhile, and now a holding-cost risk if the site sits.
• Adding a small second home is genuinely easier than it was, but it is a building project with a building permit, and it cannot be sold separately.
• Renovating what is already standing needs no planning permit for internal work, keeps you in the house, and concentrates the money on the two rooms that decide how a house feels to live in and how it shows to a buyer.

We are a renovation company, so read that list knowing who wrote it. But the specific thing the 2026 rules did was make the alternatives slower and more expensive while leaving internal renovation exactly where it was: no planning permit, no waiting, and a fixed price you can get in writing this month.

What we will not tell you is that a renovation is an investment that pays you back a defined percentage. Nobody honest can put a number on that for your specific house. What we can tell you is what the work costs, what is behind your walls, and how long it takes — and you can do your own sums from there.

Questions people ask