Hello everyone,
I have been visiting this forum as a guest for some time now and have reached the point where I would like to gather various opinions from other members.
Last July, we purchased a 400sqm (4,300 sq ft) plot of land at 750€ per sqm (750€ per 11 sq ft) (yes, I know, it’s small). We financed this plot with an interest rate of 0.9%. Since a two-family house was planned (or was supposed to be built) on this small plot, the planning process took a while due to several necessary appointments with the local authorities.
Now that the plan is finished, we are facing the current chaos in the construction industry.
Construction costs are skyrocketing, interest rates seem to rise daily, and inflation is high. Had I known what this year would bring, well, hindsight is 20/20! But no use dwelling on “what ifs.”
So here we are: the land is financed under relatively good conditions, but the situation in the building industry is telling me personally, “do everything you can, but just don’t start building now.” Beyond the soaring prices, I am especially deterred by material shortages that could lead to unpredictable delays. I don’t want to give up my apartment because I plan to have the house ready to move into within three months, only to end up without a roof over my head.
Some might say, “Well, great, you financed the land under good conditions—perfect during inflation!” but I’m a bit skeptical about that. For one thing, the land at 750€ per sqm was not exactly a bargain. Currently, due to scarcity of plots, prices are being pushed up to around 1000€ per sqm (1000€ per 11 sq ft) in some cases, but I attribute this rather to a small “bubble” created by people rushing to secure still decent conditions by buying anything available.
Moreover, from next year onward, it will reportedly become much harder for the average person to finance property as new regulations are coming into effect. Coupled with already rising interest rates, I fear the real estate market might at least soften somewhat, which could also affect land value assessments. This brings me to my question:
I know this is partly speculation, but I would like to hear what others think.
How do you see this? Do you believe land value assessments will be spared from any “drops”?
What would you do in my position? Keep the land, pay it off, and just watch how things develop over the next few years, maybe waiting for the right moment to start building?
If you ask me, I think it would be wise to sell the plot as soon as possible while there are still enough buyers willing to build. I expect the plot’s value to decrease starting next year due to new regulations and rising interest rates. The plot is only suitable for one family, and financing will become significantly more difficult for them then.
I’m looking forward to an active discussion and thank you in advance for your attention!
Best regards
I have been visiting this forum as a guest for some time now and have reached the point where I would like to gather various opinions from other members.
Last July, we purchased a 400sqm (4,300 sq ft) plot of land at 750€ per sqm (750€ per 11 sq ft) (yes, I know, it’s small). We financed this plot with an interest rate of 0.9%. Since a two-family house was planned (or was supposed to be built) on this small plot, the planning process took a while due to several necessary appointments with the local authorities.
Now that the plan is finished, we are facing the current chaos in the construction industry.
Construction costs are skyrocketing, interest rates seem to rise daily, and inflation is high. Had I known what this year would bring, well, hindsight is 20/20! But no use dwelling on “what ifs.”
So here we are: the land is financed under relatively good conditions, but the situation in the building industry is telling me personally, “do everything you can, but just don’t start building now.” Beyond the soaring prices, I am especially deterred by material shortages that could lead to unpredictable delays. I don’t want to give up my apartment because I plan to have the house ready to move into within three months, only to end up without a roof over my head.
Some might say, “Well, great, you financed the land under good conditions—perfect during inflation!” but I’m a bit skeptical about that. For one thing, the land at 750€ per sqm was not exactly a bargain. Currently, due to scarcity of plots, prices are being pushed up to around 1000€ per sqm (1000€ per 11 sq ft) in some cases, but I attribute this rather to a small “bubble” created by people rushing to secure still decent conditions by buying anything available.
Moreover, from next year onward, it will reportedly become much harder for the average person to finance property as new regulations are coming into effect. Coupled with already rising interest rates, I fear the real estate market might at least soften somewhat, which could also affect land value assessments. This brings me to my question:
I know this is partly speculation, but I would like to hear what others think.
How do you see this? Do you believe land value assessments will be spared from any “drops”?
What would you do in my position? Keep the land, pay it off, and just watch how things develop over the next few years, maybe waiting for the right moment to start building?
If you ask me, I think it would be wise to sell the plot as soon as possible while there are still enough buyers willing to build. I expect the plot’s value to decrease starting next year due to new regulations and rising interest rates. The plot is only suitable for one family, and financing will become significantly more difficult for them then.
I’m looking forward to an active discussion and thank you in advance for your attention!
Best regards
Thank you very much in advance for the numerous replies!
Actually, these guidelines are supposed to come. I understand that external links are not appreciated here, so just Google “Richtlinien Immobilienfinanzierung 2023.”
Yes, building would of course still be the best option. The location of the plot couldn’t be more ideal for me personally. Although I have a commute of about 15km (9 miles) and no access to public transport, it takes only 10 minutes by car to get to the “city,” and 10 minutes to the highway, etc.—so it’s secluded and quiet but still reasonably central. There is no building obligation. I haven’t felt comfortable in my current apartment for a long time—bad (pardon the language) neighbors, too small an apartment, no garage, rising rents, and so on.
It’s exactly the point about the unpredictability that makes me doubt the most. We would manage the trades ourselves; for things like electrical work, plastering, tiling, painting, etc., we would actually have “good” contacts and could do quite a bit ourselves.
But nobody really knows what tomorrow will bring.
Additionally, we had actually planned on financing with KfW subsidies because it would have been worthwhile for two units, and we were planning to install a heat pump combined with photovoltaic panels and a ventilation system, which would have kept the additional costs within limits.
However, with the halving of the subsidy and the increased requirements, that probably won’t happen anymore, depending on what interest rate KfW sets now.
Benutzer200 schrieb:
No.
I don’t expect any crashes at all. Maybe prices will retreat a bit in the absolute boom regions (as we have already seen for some time in Düsseldorf, for example), but that’s not a crash.
Aside from that, if crashes were to happen, of course land prices would go down as well.
You’ll never catch the perfect moment.
Since there are no new guidelines yet, you’re on the wrong track. The question is whether you want to own property or not. I also don’t see a price drop for plots of land—if something is available in Germany, it’s liquidity. And liquidity always tends to flow into tangible assets. That has been the case in recent years and will continue to be so.
If you want to build your own home, then build. If you’re really not interested, then sell the plot, pay your taxes on the profit, and enjoy it. However, if in half a year you decide to build again, it will at least be significantly more expensive financing-wise than at the time of your original land financing. You could already double the interest rate now.
Actually, these guidelines are supposed to come. I understand that external links are not appreciated here, so just Google “Richtlinien Immobilienfinanzierung 2023.”
mayglow schrieb:
Are you still planning to build? Is the plot in a location that suits you? Do you have a building obligation / completion deadline? (This is often the case in new development areas) Do you feel comfortable in your current living situation, or is it foreseeable that you will need something different soon? (Because of children, or difficult neighbors, or other reasons)
I find the situation difficult too. We have a new development area nearby that we had been eyeing… but by now I almost hope it will be delayed quite a bit before it goes on sale… If prices were at least somewhat predictable (even if high), that would be one thing, but right now everything feels uncertain.
My first idea would be to still try it, re-evaluate my financial limits in the current situation, and see if building might still be possible. Probably in a reduced form compared to the original plan. But there are many ifs and buts, depending on one's current situation.
Yes, building would of course still be the best option. The location of the plot couldn’t be more ideal for me personally. Although I have a commute of about 15km (9 miles) and no access to public transport, it takes only 10 minutes by car to get to the “city,” and 10 minutes to the highway, etc.—so it’s secluded and quiet but still reasonably central. There is no building obligation. I haven’t felt comfortable in my current apartment for a long time—bad (pardon the language) neighbors, too small an apartment, no garage, rising rents, and so on.
It’s exactly the point about the unpredictability that makes me doubt the most. We would manage the trades ourselves; for things like electrical work, plastering, tiling, painting, etc., we would actually have “good” contacts and could do quite a bit ourselves.
But nobody really knows what tomorrow will bring.
Additionally, we had actually planned on financing with KfW subsidies because it would have been worthwhile for two units, and we were planning to install a heat pump combined with photovoltaic panels and a ventilation system, which would have kept the additional costs within limits.
However, with the halving of the subsidy and the increased requirements, that probably won’t happen anymore, depending on what interest rate KfW sets now.
I would not sell. Would I build?.. Probably yes, if I can afford it financially. Then with a buffer, and the general contractor should order the necessary materials upon signing the contract.
Personally, I expect inflation to continue for several months at the current rate. Interest rates are still low, and there is plenty of money available. That alone is an indicator, but there is also a real shortage of some goods, which is driving prices even higher.
The European Central Bank is almost powerless, as it does not want to risk a wave of bankruptcies. My conclusion: inflation will remain high, prices will continue to rise, build if financially possible.
Personally, I expect inflation to continue for several months at the current rate. Interest rates are still low, and there is plenty of money available. That alone is an indicator, but there is also a real shortage of some goods, which is driving prices even higher.
The European Central Bank is almost powerless, as it does not want to risk a wave of bankruptcies. My conclusion: inflation will remain high, prices will continue to rise, build if financially possible.
H
HilfeHilfe8 Apr 2022 06:32If there is no building obligation and you are in a boom area, I would keep the land and pay it off as long as you can afford it.
It becomes difficult if the neighboring plots on the left, right, front, or back are already developed, making your property less attractive for sale.
400 square meters (4,300 square feet) is not a large plot, and depending on how the neighbors develop their land, there might not be many buyers lined up.
It might be better to sell it for 1,000 per square meter (0.09 square feet) and enjoy the profit.
It becomes difficult if the neighboring plots on the left, right, front, or back are already developed, making your property less attractive for sale.
400 square meters (4,300 square feet) is not a large plot, and depending on how the neighbors develop their land, there might not be many buyers lined up.
It might be better to sell it for 1,000 per square meter (0.09 square feet) and enjoy the profit.
B
Benutzer2008 Apr 2022 08:00Renat11 schrieb:
Actually, these guidelines are supposed to be introduced. I’ve noticed that external links are not welcomed here, so just google "Real Estate Financing Guidelines 2023." So far, there are only discussions about limiting the Loan-to-Value ratio (LTV). Nothing more. Those who can’t realistically afford to build today (but insist on doing so and manipulate their credit scores) definitely wouldn’t be able to then. Those who can build today will still be able to do so. The aim is to slow down full financing in overheated markets.
All banks here are quite relaxed about it (I work at a real estate bank myself).
P.S. I think 400 sqm (4300 sq ft) is already generous and always sufficient for a house in a prime location.