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.
xMisterDx schrieb:
I can understand you all, since you’ve been part of a community for years where every forum member can easily afford 400,000 EUR just for a turnkey house... I don’t understand why you consider your personal situation more important than the question itself?
I also don’t know whom you mean by addressing “you” multiple times in one evening? Perhaps, if it’s personal with quotes, it would be better to use “you” instead of “you all”?
Since you quoted me:
I live in my own little world and paid about 1,650 EUR per square meter (153 USD per square foot) for our house. The land is leasehold and I don’t have KNX. Our net income is currently under 5,000 EUR (5,400 USD). That won’t increase anymore. When we built, it was around 4,000 EUR (4,300 USD).
And if there’s more to come, please remember these figures, because otherwise communication might become a bit difficult 😉
xMisterDx schrieb:
How can you approve houses with 120m² (1,292 sq ft)? At best, that’s only suitable for 2 people, if that.Have you had too much to drink? I mean… it’s Saturday, just before midnight…X
xMisterDx7 May 2022 23:56ypg schrieb:
Have you had too much to drink? I mean... it’s Saturday, just before midnight...I’m happy to return the compliment. I pointed out that neither a children’s bathroom, nor a stove, nor KNX home automation are anywhere near standard in Germany.
I’m open to examples to the contrary, and I’ll also gladly ask around the neighborhood on Monday... after all, there are over 50 shell constructions completed.
xMisterDx schrieb:
Maybe it makes sense to have a soil report done soon. Don’t let the same happen to you as it did to me (Mister) 😉
rifoxa4902 schrieb:
By driveway I meant that we would initially give up on a garage and just pave two parking spaces (as required by the development plan). Later on, it might be possible to add a wooden carport on top. The plot itself is not on a slope but is quite level. If you really want a garage or carport, plan for it from the start. It won’t get cheaper later.
xMisterDx schrieb:
I know people... really, even close friends, who now only buy butter on sale... Why only now?
There are so many everyday items where buying at the regular (overpriced) price can simply be avoided. (No matter if you have a net income of 2,000€, 5,000€, or 10,000€ per month.)
M
motorradsilke8 May 2022 05:27ypg schrieb:
It doesn’t happen that quickly 😀
Building design and permit approval will most likely take until the new year.Please don’t generalize all the time. It can also be faster, depending on how much effort you put in and how the building authority operates.
N
Neubau20228 May 2022 07:24Franzbrot schrieb:
This is actually more like our "still acceptable scenario," which we have also discussed due to the current situation (price and interest rate increases).
14-15 would also be our favorite! This is how we are currently building as well. The child's room is 15.5 sqm (167 sq ft). The office is just under 15 sqm (161 sq ft). In total, a 141 sqm (1,518 sq ft) bungalow for 3 people. And we will be moving from a 70 sqm (753 sq ft) apartment. That will feel huge :-)