building on or up on your existing house, will be far cheaper than building a new house from foundation up. and seeing how the economy plays out , it would be the best bet to lessen your dept on a new home, the saving will be more than half depending on the size of the upgrade. The media or even the estate agents are always trying to convince you now is the time to sell , sell and go where? that's a question you could think about.
the reason for building up could be because your family is getting bigger or because you would like more room and more space to move around, or could be that you thinking of renting the top half out to people looking for a place to rent . (e.c.t)