Owners of a property at 384-386 Napier Street want to demolish the derelict house and sell the property. 

However council has noted the historical significance of the site, saying a permanent heritage overlay should be appointed. 

Crs Helen Leach and Elise Chapman argued against the overlay, saying the building was unsalvageable. 

"The house is ghastly. We're wasting a good piece of real estate (by refusing demolition) because it is a large block in a prime position," Cr Leach said. 

Cr Chapman said similar properties had been demolished for the greater good. "We have to weigh up heritage with residential growth," she said.  

But Cr Peter Cox said the city was built on tough heritage decisions. 

"Council must preserve history and heritage where possible," he said. 

"It's not a personal matter, it's a matter of policy."