The developers who paid $9.6 million to bulldoze a stunning Federation house in one of Melbourne's most valuable streets have put the dusty vacant block back on the market - sans mansion - for almost double what they paid for it two years ago.

Hong He and Yuhan He purchased 9-11 Edward Street, Kew for $9.6 million from Hawthorn Football Club president Andrew Newbold and his wife, Sarah, in May 2015, public land titles show. The Hes this week listed the empty 2700-square metre block for sale at $17.5 million.

In that time, the state government's refreshed Plan Melbourne blueprint removed the cap on how many dwellings could be built on a block; instead, there are now mandatory garden space requirements. With council approval, the prestigious Sackville ward block could be developed into multiple dwellings and is advertised as such.

The City of Boroondara campaigned heavily against the changes, which came into effect in March, including distributing a $70,000 mail-out to residents. The area was one of the most locked-up neighbourhoods in the city, due to strict planning rules brought in under previous planning minister Matthew Guy.

The flattened home had undergone a full renovation by Mrs Newbold, an interior designer, including the restoration of its many period features such as its stately facade.

Listing agent Justin Hocking, of Hocking Property Consulting, could not be contacted for comment.

In January 2016, Liberal MP Tim Smith unsuccessfully campaigned to save the Edward Street home from the wrecking ball due to its historic significance. It was razed in July.

"They bulldozed that lovely home," Mr Smith said on Wednesday, when told of its re-listing at $17.5 million. "It's just outrageous, you could blow me down with a feather, it's disgraceful. It shows that the Richard Wynne and the Labor Party couldn't care less about Melbourne's heritage ... they're just trashing the joint."

A spokesman for Mr Wynne said any development proposal would need to respond to the council's local policies.

"Our new residential zones provide certainty to neighbourhoods," he said. "Our new rules deliver mandatory height limits and a minimum amount of garden area to ensure our suburbs have a green and open character."

Earlier this month a rundown house in Kooyong Road, Toorak ??? bought in 2010 for $6.19 million ??? sold at a discount after struggling to sell for about four years. The price, believed to be more than $5.8 million, was reduced after Stonnington council slapped a heritage overlay on the house.

The Kew demolition was one of a string of inner-east knockdowns that outraged local residents, including a landmark mansion at 16 St Georges Road, Toorak, and Gough Whitlam's Kew birth home, Ngara.

A scarcity of inner-city land and growing demand from foreign buyers and developers for properties with development potential has seen prices soar. Real estate agents are now marketing perfectly liveable homes with land boxes across them, luring buyers with the size of the land holding.

A recent analysis by the Grattan Institute showed boosting density in the middle suburbs would have one of the most positive impacts on housing affordability, but would be one of the most politically difficult to achieve.