ᐅ Should I buy a plot of land now to start building in 2023 or 2024?
Created on: 7 May 2022 15:18
R
rifoxa4902R
rifoxa49027 May 2022 15:18Hello everyone,
I’ve been following this forum for a few weeks now and I’m currently finding it very difficult to make a decision regarding our house building plans. There have been similar posts here over the past days/weeks, and as far as I can tell, I am not alone in facing this kind of decision.
A bit of background:
Last year, we initially tried to find an existing property. However, many rather unpleasant experiences with the houses on offer, the agents, and bidding processes led to frustration on my part, and I ended up investing a lot of energy into searching for a building plot instead.
In the search for a plot, I seem to have had either a lot of luck or skill (or both), as I now have the opportunity to buy a municipal plot under good conditions (however, unfortunately with a building obligation requiring construction to start no later than 2024 and completion within 3 years plus 2 years).
As it often happens, I got the confirmation for the plot at roughly the same time interest rates increased sharply and the Ukraine crisis began.
Right now, we are quite unsettled due to the currently unpredictable construction cost situation. We would rather not start building this year and are considering whether to secure the plot for a building start in 2023 or 2024 instead. Or possibly to abandon the idea of building altogether, although existing properties are not getting any cheaper either.
Some key facts about us:
- Desired house size (single-family home): 100-120 sqm (simple standard, nothing fancy, a basic kitchen is fine, no basement, simple driveway)
- Ages: 43 (male) and 38 (female), 1 child aged 4, no further children planned
- Net income (combined): over 5,300 euros net per month (plus various bonus payments amounting to several thousand euros), the female partner currently works part-time, with an additional net potential of about 800 euros
- Current equity: 210,000 euros (increasing by approximately 20,000 to 25,000 euros per year)
Our rough cost estimate for the house is as follows (feedback on whether this sounds roughly realistic is welcome):
- Plot costs (1,000 sqm (1,200 square yards)) including development, notary, tax: 85,000 euros (price fixed)
- Building location: Schleswig-Holstein
- Pure construction costs (estimated for 100-120 sqm): 300,000 euros
- Additional construction-related costs (estimated): 80,000 euros
- Total cost: 465,000 euros (minus equity leaves a financing requirement of 255,000 euros)
- With a monthly payment of 1,600 euros and an interest rate of 3%, we would need about 17 years to repay and finish before retirement.
Our naive assumption is that building under these calculations, if started now at current interest rates (3%) and construction costs, would work fairly well, but due to the currently unpredictable construction cost situation, it feels too risky (we don’t see much buffer in the loan repayment). Instead, we are considering securing the plot now, accumulating more equity by next year, and then starting to build in 2023 or 2024 (completing the build by 2026 at the latest).
What do you think about this? What would you do in our situation? (I have outlined a few options below.)
I would...
- start building as soon as possible despite the unpredictable construction cost situation (development likely only starting in August)
- secure the plot now despite the building obligation (with a latest start in 2024) and wait for a more cost-predictable situation in 2023 or 2024. If building cannot proceed in 2023 or 2024, simply give up the plot—but at least we would have preserved the opportunity to build
- not buy the plot at all, as construction costs and interest rates are expected to rise so much and so quickly that households with incomes like ours will no longer be able to build in the near future
- ...
Many thanks in advance for your evaluations and opinions.
I’ve been following this forum for a few weeks now and I’m currently finding it very difficult to make a decision regarding our house building plans. There have been similar posts here over the past days/weeks, and as far as I can tell, I am not alone in facing this kind of decision.
A bit of background:
Last year, we initially tried to find an existing property. However, many rather unpleasant experiences with the houses on offer, the agents, and bidding processes led to frustration on my part, and I ended up investing a lot of energy into searching for a building plot instead.
In the search for a plot, I seem to have had either a lot of luck or skill (or both), as I now have the opportunity to buy a municipal plot under good conditions (however, unfortunately with a building obligation requiring construction to start no later than 2024 and completion within 3 years plus 2 years).
As it often happens, I got the confirmation for the plot at roughly the same time interest rates increased sharply and the Ukraine crisis began.
Right now, we are quite unsettled due to the currently unpredictable construction cost situation. We would rather not start building this year and are considering whether to secure the plot for a building start in 2023 or 2024 instead. Or possibly to abandon the idea of building altogether, although existing properties are not getting any cheaper either.
Some key facts about us:
- Desired house size (single-family home): 100-120 sqm (simple standard, nothing fancy, a basic kitchen is fine, no basement, simple driveway)
- Ages: 43 (male) and 38 (female), 1 child aged 4, no further children planned
- Net income (combined): over 5,300 euros net per month (plus various bonus payments amounting to several thousand euros), the female partner currently works part-time, with an additional net potential of about 800 euros
- Current equity: 210,000 euros (increasing by approximately 20,000 to 25,000 euros per year)
Our rough cost estimate for the house is as follows (feedback on whether this sounds roughly realistic is welcome):
- Plot costs (1,000 sqm (1,200 square yards)) including development, notary, tax: 85,000 euros (price fixed)
- Building location: Schleswig-Holstein
- Pure construction costs (estimated for 100-120 sqm): 300,000 euros
- Additional construction-related costs (estimated): 80,000 euros
- Total cost: 465,000 euros (minus equity leaves a financing requirement of 255,000 euros)
- With a monthly payment of 1,600 euros and an interest rate of 3%, we would need about 17 years to repay and finish before retirement.
Our naive assumption is that building under these calculations, if started now at current interest rates (3%) and construction costs, would work fairly well, but due to the currently unpredictable construction cost situation, it feels too risky (we don’t see much buffer in the loan repayment). Instead, we are considering securing the plot now, accumulating more equity by next year, and then starting to build in 2023 or 2024 (completing the build by 2026 at the latest).
What do you think about this? What would you do in our situation? (I have outlined a few options below.)
I would...
- start building as soon as possible despite the unpredictable construction cost situation (development likely only starting in August)
- secure the plot now despite the building obligation (with a latest start in 2024) and wait for a more cost-predictable situation in 2023 or 2024. If building cannot proceed in 2023 or 2024, simply give up the plot—but at least we would have preserved the opportunity to build
- not buy the plot at all, as construction costs and interest rates are expected to rise so much and so quickly that households with incomes like ours will no longer be able to build in the near future
- ...
Many thanks in advance for your evaluations and opinions.
A plot of land that already exists allows for clarifying basic issues early on. In Schleswig-Holstein, I assume that the homeowner and the landowner can agree on whether a basement is necessary. A soil survey could also be helpful. Otherwise, I see the description of a reasonably sized house; this is balanced against financial conditions that don’t seem like a tightrope walk. Regarding interest rates and material price trends, I don’t want to raise unrealistic hopes, but if (as in the song "Geier Sturzflug") "Europe is still standing," I believe it will be possible to find materials and skilled workers in 2024. Let me put it this way: others might hesitate more, but in your case, the risks seem manageable. Missing out on opportunities to buy land at fair prices, however, would currently seem to me to cross the line decisively between optimism and madness.
https://www.instagram.com/11antgmxde/
https://www.linkedin.com/company/bauen-jetzt/
https://www.instagram.com/11antgmxde/
https://www.linkedin.com/company/bauen-jetzt/
H
Hausbautraum207 May 2022 15:47Hello,
definitely go ahead and buy the plot of land, that should be quite easy for you.
How quickly you build afterward can still be decided later. However, I would start with the planning right away.
definitely go ahead and buy the plot of land, that should be quite easy for you.
How quickly you build afterward can still be decided later. However, I would start with the planning right away.
K
k-man20217 May 2022 16:25If you are sure that you really want to build and you like the plot and location, then where exactly is the problem given your financial situation? Clearly, buy the land and start planning; you can then adjust the start of construction according to the circumstances in 2023/2024.
Buy and start planning. There won’t be any groundbreaking before mid-2023 anyway.
And what do you mean by simple driveway? On a slope?
rifoxa4902 schrieb:Simple and small is fine. However, as a homeowner, you should consider that you will need more space than a renter in a 90 sqm (970 sq ft), 3-room apartment because of all the equipment and belongings. Please plan enough storage space.
Single-family house: 100–120 sqm (requirement: basic standard, no luxury, cheap kitchen is sufficient, etc.; no basement, simple driveway)
And what do you mean by simple driveway? On a slope?
Hausbautraum20 schrieb:
I would recommend starting the planning process right away.However, given the described conditions, "planning" does not necessarily mean a fully custom design – in this case, I would suggest taking a close look at the available range of standard house models.https://www.instagram.com/11antgmxde/
https://www.linkedin.com/company/bauen-jetzt/