Development Issues – Brisbane – Advice pls

Hello All
We bought a 50s queenslander 12 months ago in a decent Brisbane suburb within 10kms of the city with the view to raise and renovate the house to a 5 bedroom 2 level house + 2 new Town Houses at the back ($585K). House is currently getting approx $390 pw on a $525 mortgage. Everything has been reasonably smooth and we have an DA which has been aapproved and issued. The approx cost including the house and development is around the $1.45m leaving us with about $340K built in equity at completion. The market has moved enough to now cause us a few issues with trying to complete the 1st stage – the house raise and renovate part of the project (Town House part is still OK and on budget) The quotes are coming in approx $100K over budget due to the complexity of the raise and renovate of the house and also the reluctance of trades to stuff around with a major reno with amount of other work going on in Brisbane at the moment, some builders are quoting $2K sq m. My project manager admits he should have raised the alarm bells earlier during the DA when we were doing the plans ete as the plans are great but extensive to do to a 50s weather board.

He has given us 3 options
1. Sit and wait for the next cycle i.e for approx 24-36 months and hope that costs particularly renovation cost come back down.
2. Raise and renaovate house but cut way back on the renovation part = result approx low to mid $200K buily in equity at completion.
3. Demolish the house and build a brand new nice but simple 4/5 bedroom x 2 story house inline with the approved DA = approx $220K built in equity.

In teh end option 2 and 3 provide approx $100K less in built in equity which isnt good compared to teh initial feasibility of $300-$320K.

What would you guys do?? Any advice or feedack would be greatly appreciated as its great to get other opinion. There is obviously extra holdings costs etc, plus there is pro and cons to each of the options. Love to hear your thoughts