ᐅ Should I buy a plot of land now to start building in 2023 or 2024?
Created on: 7 May 2022 15:18
R
rifoxa4902
Hello 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.
X
xMisterDx7 May 2022 23:03ypg schrieb:
Well, I’ve been following this forum for quite some time: 90% want it and can’t do without it. By the way, the list is only the tip of the iceberg of what most people want, which is also why building a house ends up costing over €3000 per square meter (over $320 per square foot). Based on a, admittedly spontaneous, survey of incomes in this forum, I have to assume that mainly the top 10% of society are posting here…
For example, until yesterday, I thought we were doing really well with just over €5,000 net per month (about $5,300)…
And then you see figures like €5,500, €6,300, €6,700 (about $5,850, $6,700, $7,150) in almost every post. 😀
Friends… you are discussing things in a whole different league… as I said, I’m just a simple guy… for me, a guest toilet is already a luxury that isn’t absolutely necessary…
(edit)
I even know people, honestly, some quite close to me, who now only buy butter when it’s on sale…
R
rifoxa49027 May 2022 23:11xMisterDx schrieb:
May I ask quite directly where this uncertainty comes from? Whether you can afford it?
I mean, the plot is unbelievably cheap, and the budget for a 120m² (1,292 sq ft) house with 300,000 plus 80,000 additional construction costs is really generous.
The only way this could backfire is if, for example, a pile foundation is required or an ancient Viking settlement is discovered underground... maybe it makes sense to have a soil survey done soon.
With a net household income of over 5,000 EUR (about 5,400 USD) per month, you belong to the top 20%. Who else should be able to take out a 250,000 EUR (around 270,000 USD) loan if not this top 20%? 😉
I also understand the desire to repay as much as possible, but I would rather set the monthly payment a bit lower. Life can throw curveballs, and then it’s hard to sleep if your monthly payment suddenly becomes 50% (or more) of your net household income.
For my loan, I agreed on a monthly payment of 1,300 EUR (about 1,400 USD), and whatever extra I can save each year, I pay as an early repayment. I’m allowed to pay 5% of the total sum per year without fees.
Of course, on average I want to reach 1,600–1,800 EUR (about 1,700–1,940 USD) per month... but it’s not absolutely necessary; that’s the difference. I’m happy to answer your direct question. The uncertainty definitely has several reasons at the moment:
- I have no prior experience with building a house or everything involved, and I am just starting to learn.
- The prices in all the model home catalogs vary widely. There are providers quoting about 200k EUR (around 215,000 USD) for 120m² (1,292 sq ft), but others list 290k EUR (around 310,000 USD). There are several different ones in between.
- What really unsettles me, though, are the construction costs mentioned here in the forum, like “there’s no way to build for under 3,000 EUR per m² (about 280 USD per sq ft) anymore.” Of course, I then wonder if those figures apply to straightforward projects like ours. Without experience, it’s hard to judge.
The 80,000 EUR (about 86,000 USD) additional construction costs were already mentioned for certain types of builds, but I’m sure it depends on the details—what exactly they included, for example kitchen, landscaping, etc.
Thanks for the advice about the monthly payment. I will definitely reconsider that.
xMisterDx schrieb:
I might be a bit unpopular with this… but you shouldn’t go below 12m² (130 square feet) for children’s bedrooms.
Especially not with the mindset of “Okay, one kids’ room at 20m² (215 square feet), and if a second one is needed, we’ll just split it.” 😉 No, it’s all good. It doesn’t happen that fast.
Right now, we have around 14.something meters squared (150.something square feet) planned, and I’m hoping it stays that way.
The 10 to 11m² (108 to 118 square feet) are our “if all else fails” option. Our architect recommended having that in mind, given how unstable the current developments are.
X
xMisterDx7 May 2022 23:18rifoxa4902 schrieb:
I’d like to directly respond to your question. There are several reasons why I’m currently uncertain:
- I have no previous experience with building a house or the related processes and am just starting to learn about it.
- The prices in the various model home catalogs vary significantly. Some providers quote prices around 200,000 for 120 m² (1,292 sq ft), while others list about 290,000. There are also many offers in between.
- What actually unsettles me are the construction costs sometimes mentioned here on the forum (for example: nowadays, nothing goes for less than €3,000 per m² (about $280 per sq ft)!). Of course, I wonder whether these figures also apply to modest requirements like ours. Without experience, this is difficult to assess.
We have actually been quoted additional construction-related costs of 80,000 from some building types, but the exact details depend on what they included—for example, kitchen, outdoor landscaping, etc.
Thanks for the advice about the installments. I will definitely reconsider that.Thank you!
The real question is how upscale the build should or must be. Naturally, I can’t give any recommendations—I’m currently building myself and would not recommend my general contractor, as there was too much hassle beforehand…
My question was more about what makes you feel uncertain regarding the financing or the sums involved?
I financed 350,000 EUR (about $385,000) and our household net income with four people is 4,500 EUR (about $5,000) fixed, with the possibility of more depending on my work situation (field assignments worldwide).
You seem to be in a much better position… and yet you’re worried…
Why?
rifoxa4902 schrieb:
There are providers quoting prices for 120sqm (1292 sq ft), some around 200,000€, but also others currently listing 290,000€. There are several options in between as well. And if you adjust the services to match those of the more expensive ones (see the building specification), then their price trend also moves toward 290,000€… or just below.
But I don’t want to jump ahead — there is plenty to read in the forum, which is better done firsthand.
rifoxa4902 schrieb:
The 80,000€ additional construction costs rifoxa4902 schrieb:
Question is, what exactly did they include in that, for example kitchen, landscaping, etc. The kitchen is considered furniture, and landscaping is not part of the additional construction costs either.
Additional construction costs are the expenses required to make it possible to develop the plot, build the house, and connect it to utilities: earthworks, building permits/planning permission, and utility connections.
Take a look in the construction costs subforum!
X
xMisterDx7 May 2022 23:35ypg schrieb:
And if you adjust the services to the more expensive specifications (see construction service description), then the estimate also moves towards €290,000 (about $310,000) or just below.
But I don’t want to get ahead of myself—there’s a lot to read in the forum that’s better done by yourself anyway. I don’t understand this argument.
Of course… if I order a BMW 335i or equivalent from Ford, it will cost nearly as much as a BMW 335i from BMW.
But if I buy a Ford Focus ST, I can still drive it and have paid much less than for a 335i, right?
I get where you’re coming from—you’ve been living in a world for years where every forum member can easily spend €400,000 (about $430,000) just for a turnkey house… but is that really up to date?
Maybe think about it overnight…
PS:
I think I get it… basically, it’s not expected that someone is satisfied with just a guest toilet and that their two kids don’t each get their own floor with 25m² (270 ft²) kids’ rooms, private bathrooms, fireplaces, galleries, and, of course, their own balconies? 😉
How can you approve houses of 120m² (1,290 ft²)? That’s at best suitable for two people, if at all?
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