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 22:38Franzbrot schrieb:
So we're already two.
So far, I have only occasionally missed the second bathroom among the items listed. Funny, isn’t it? ... I had to argue for hours with my father about why 150m² (1,615 sq ft) are necessary for 4 people...
(I work entirely from a home office, plus some fieldwork, and absolutely need a dedicated study...)
I found websites online where a children’s bedroom under 20m² (215 sq ft) is almost considered harmful to the child’s wellbeing...
xMisterDx schrieb:
Funny, isn’t it? ... I had to spend hours debating with my father about why 150m² (1,615 sq ft) is necessary for 4 people...
(I work entirely from home—plus some fieldwork—and absolutely need a dedicated home office...)
I found websites where a children’s bedroom under 20m² (215 sq ft) is almost considered child neglect... I’ve also noticed the trend for what seem to me to be oversized children’s bedrooms, and to be honest, I hardly dared to tell the architect that 10–11m² (108–118 sq ft) rooms would be fine for us (after all, the kids should eventually have an incentive to move out and not just stay in their rooms all day).
Even with houses under 180m² (1,938 sq ft) nowadays, people tend to almost pity you and ask why you’re building at all.
But maybe this madness will stop now with rising prices.
By the way, the house currently on our property is 83m² (893 sq ft), and a family with three kids lived there. Today, that would probably be considered a “difficult” living situation.
X
xMisterDx7 May 2022 22:50Franzbrot schrieb:
I've also increasingly noticed the (to me) oversized children's rooms, and to be honest, I barely dared to tell the architect that 10-11 m² (108-118 sq ft) children's rooms would be fine for us (they should eventually have an incentive to move out and not spend all day inside)
(...) 10-11 m² (108-118 sq ft) 😳 okay, I still think that's definitely too small.
We have 15 m² (161 sq ft) per children's room; it was very important to me that the rooms are as equal in size as possible...
As kids, we had 12 m² (129 sq ft), which was okay because we also had a shared playroom that doubled as an office.
But I don't see the point of having significantly more than 15 m² (161 sq ft).
PS:
I have a colleague who, until two years ago when he bought a house, lived with five people in 85 m² (915 sq ft).
To this day, I haven't figured out how he managed that... we, with currently three (soon four) people in a 96 m² (1,033 sq ft) rental apartment, already don't know where to put all our stuff...
xMisterDx schrieb:
10-11m² (108-118 sq ft) 😳 ok, I still think that’s clearly too small.
We have 15m² (161 sq ft) per kids’ room, it was very important to me that the rooms are as equal in size as possible...
When we were kids, our rooms were 12m² (129 sq ft), which was okay because we also had a shared playroom that doubled as an office.
But I don’t see the need for much more than 15m² (161 sq ft). That is actually our “still acceptable” scenario that we discussed due to the current situation (price and interest rate increases).
14-15m² (151-161 sq ft) would also be our preference!
xMisterDx schrieb:
Children’s bathroom? Stove, meaning fireplace? KNX, meaning complete home automation... is that really considered high-end standard nowadays, without which you can’t manage anymore?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 just the tip of the iceberg of what most people want, and why building a house often costs over 3000€/m² (about $280 per sq ft).X
xMisterDx7 May 2022 22:59Franzbrot schrieb:
This is actually more like our "this is still acceptable" scenario, which we have also discussed given the current situation (price and interest rate increases).
14-15 would also be our favorite! I might be unpopular with this, but you really shouldn’t go below 12m² (130 square feet) for children's bedrooms.
Especially not with the mindset of "Okay, one children's room of 20m² (215 square feet) and if a second child comes along, they just share it." 😉
Kids grow up, and I can confirm this from personal experience. A bed, wardrobe, shelves, and a desk easily take up 6-8m² (65-85 square feet) on their own. This isn’t entirely selfless either... if children feel there isn’t enough space to play in their room, they bring all their stuff into the living room. 😉
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