In view of the current market and the poor forecasts for the RE market for the next several years (maybe poor for the next ten years if the world economy does bad) I would sell the place, put the difference between 362,000 and 185,000 in the bank - the interest would help pay rent - then just wait to buy the bigger house in the future at the right time - it'a all about timing.
Prices are going to drift down some more for some time yet, but no way are they going back to 1992 levels, that would mean a Melbourne house median of $137,800 - even I as a current property bear would not wish that on home owners - my property owning friends would exorcise me.
