Just a comment on adding value to the asset, I guess I see the asset as being the land. That's what's going to appreciate in value - the house itself will depreciate. So personally, I'd go the bigger block. But that's coming from someone who is looking to one day buy a house we like rather than one to 'do up' as we'd be one of those couples who never gets the renos finished, LOL.
GL with your decision, mate.