530sqm ain't a big block - longer term I would prefer more room for the kids.

Renos always cost more money and take more time than anticipated - unless you really had a passion for renovation I wouldn't see that as a plus.

With number 3 so close to arriving, I'd prefer a house that was more comfortable to live in right now, especially after all the upheaval of moving.

Plus I'm funny about power lines...I'd prefer to be away from them.

20 minutes isn't far to travel.

Depending on how close it was to the flight path, the smaller house would be my preference.

ETA: Another option is to pick the house you think will appreciate in value the most over the next 5 years and buy that one - 3 minutes to the city surely would be the most likely candidate here. Live in it, make some improvements and you'll have more money to buy the "forever house" in few years time, unless school catchments are likely to be an issue and you need to stay in the same area to get the school you want for your DS.