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
HilfeHilfe schrieb:
If there is no building obligation and you are in a boom area, I would keep the plot and pay it off if you can afford it. I completely agree. I would wait and build in a few years when the situation has calmed down and stabilized.
Other factors like additional savings rate, salary increases, current rental costs, age or time until retirement, children, or other considerations could also be taken into account...
I have also been a long-time silent “reader” of the forum, and we are currently facing the same decision.
We purchased our plot of land at the beginning of the pandemic at a normal price with favorable interest rates. After several delays, we are able to start construction this year. It is not possible to prepare a detailed cost breakdown at this point, so we have applied a 20% contingency to the cost estimate from Q3/2021 (whether this will be sufficient will probably only become clear during construction). We plan to finance most of the house construction through the sale of an existing property (apartment sale).
These are the questions that have occupied us in recent weeks:
1) Should we sell the plot again?
If we were to sell now, we could realize about a 15% “profit.” This profit would be fully taxable, and after deducting incidental costs and the planning expenses already incurred for the house, it would roughly break even.
For us, a much more important aspect in answering this question is:
We searched for about 7 years for a plot in this area, and only by luck did we acquire this one. Selling it would mean that we would not build a house in this lifetime, as the chance of finding a similar plot again is simply too low (we are no longer very young).
We have answered this question for ourselves as follows:
Even if we do not build, we will (for now) consider the plot as an investment.
2) Should we start building the house immediately or wait another year or longer?
I believe everyone is familiar with the current situation:
- Raw material prices at record levels
- Rising construction loan interest rates
- Very high inflation
- Strong demand for homeownership
- Highly booked craftsmen and contractors
No one can really predict how this will develop. For our part, we do not expect prices to fall dramatically next year. In addition to high inflation, we will likely still feel the effects of industrial bottlenecks next year. Rising construction loan interest rates will probably lead to lower prices, but these will be balanced by inflation.
Based on these considerations, we have decided to build this year, as we do not expect things to be “significantly” better next year.
We purchased our plot of land at the beginning of the pandemic at a normal price with favorable interest rates. After several delays, we are able to start construction this year. It is not possible to prepare a detailed cost breakdown at this point, so we have applied a 20% contingency to the cost estimate from Q3/2021 (whether this will be sufficient will probably only become clear during construction). We plan to finance most of the house construction through the sale of an existing property (apartment sale).
These are the questions that have occupied us in recent weeks:
1) Should we sell the plot again?
If we were to sell now, we could realize about a 15% “profit.” This profit would be fully taxable, and after deducting incidental costs and the planning expenses already incurred for the house, it would roughly break even.
For us, a much more important aspect in answering this question is:
We searched for about 7 years for a plot in this area, and only by luck did we acquire this one. Selling it would mean that we would not build a house in this lifetime, as the chance of finding a similar plot again is simply too low (we are no longer very young).
We have answered this question for ourselves as follows:
Even if we do not build, we will (for now) consider the plot as an investment.
2) Should we start building the house immediately or wait another year or longer?
I believe everyone is familiar with the current situation:
- Raw material prices at record levels
- Rising construction loan interest rates
- Very high inflation
- Strong demand for homeownership
- Highly booked craftsmen and contractors
No one can really predict how this will develop. For our part, we do not expect prices to fall dramatically next year. In addition to high inflation, we will likely still feel the effects of industrial bottlenecks next year. Rising construction loan interest rates will probably lead to lower prices, but these will be balanced by inflation.
Based on these considerations, we have decided to build this year, as we do not expect things to be “significantly” better next year.
F
Fuchsbau359 Apr 2022 15:31If there is no obligation to build, I would definitely keep the plot. Land prices are unlikely to decrease in the future, as building land will become increasingly scarce due to various factors. Whether you build now or later, no one can reliably predict that here, since nobody knows how things will generally develop.
Just to give an example – and everyone needs to be aware of this themselves.
I’m not trying to praise myself here, nor justify my actions.
We built an unusually large, structurally very complex house that, in terms of return on investment or cost-benefit ratio, is actually not a good one, using a lot and a lot and even more non-German-speaking foreign helpers. (Thanks to Google Translator)
Others might call this a passion project.
- Over two years, we saved around 200,000 to 250,000 euros net (comparison architect-planned turnkey build: 1300 vs. 2200-2400 €/m2).
- But I also spent at least 4 hours every day on site for two years, working until 4 p.m. on Saturdays.
- We are now the happiest people on this planet, and this project has brought my wife and me closer together than anything else ever has in our marriage.
However, if you don’t pull together, can’t persevere in difficult times, and aren’t ultra-optimistic, such a project can also bring irreversible, serious risks.
Everyone must be aware of this fact.
Looking back, there is only one thing to say: without ambition and unconditional commitment, we would still be stuck in the same place where we were five years ago—
only now with children, pets, and no space in the city, stuck.
For me, building a house for myself and my family was the greatest thing. Of course, this is an extreme example. There is always a middle ground.
I’m not trying to praise myself here, nor justify my actions.
We built an unusually large, structurally very complex house that, in terms of return on investment or cost-benefit ratio, is actually not a good one, using a lot and a lot and even more non-German-speaking foreign helpers. (Thanks to Google Translator)
Others might call this a passion project.
- Over two years, we saved around 200,000 to 250,000 euros net (comparison architect-planned turnkey build: 1300 vs. 2200-2400 €/m2).
- But I also spent at least 4 hours every day on site for two years, working until 4 p.m. on Saturdays.
- We are now the happiest people on this planet, and this project has brought my wife and me closer together than anything else ever has in our marriage.
However, if you don’t pull together, can’t persevere in difficult times, and aren’t ultra-optimistic, such a project can also bring irreversible, serious risks.
Everyone must be aware of this fact.
Looking back, there is only one thing to say: without ambition and unconditional commitment, we would still be stuck in the same place where we were five years ago—
only now with children, pets, and no space in the city, stuck.
For me, building a house for myself and my family was the greatest thing. Of course, this is an extreme example. There is always a middle ground.
O
Oetzberger9 Apr 2022 21:19Just don’t sell the land as long as you basically still intend to build in the future. Land remains permanently scarce as long as environmental policies make the designation of building land so extremely difficult. Construction costs may eventually become more manageable compared to income. And company workloads might decrease at some point. But land will continue to be in demand.