Hello everyone,
We find ourselves in the following dilemma: My wife and I have been searching for a plot of land more or less intensively for the past 7 years. Our location options are very limited. In the usual public allocations, despite having two children, we often don’t meet the points criteria for winning building plots. However, I was able to secure a plot through a blind bidding process with the following details:
- 650 m² (7000 sq ft) in a prime location.
- High requirements for the building project: solar installation mandate, extensive green roofing, decentralized rainwater retention, etc.
The problem: The current situation with skyrocketing interest rates, general contractors who no longer can or want to build at fixed prices despite fixed price agreements, and the discontinuation of KFW funding. We (dual-income household, one civil servant) can still afford the project, but we have to decide within the next two weeks how to proceed.
(1) Launch the entire project with appropriate financing. We have a financing confirmation, but a reliable estimate of the final project cost is hardly possible. Our meeting with the general contractor is scheduled for today. The house is 95 percent fully planned (status summer 2021).
(2) Under conditions of raw material shortages and lack of funding, secure only the land for now and buy some time. The issue is less about missed loan repayments and more about interest rate trends and the requirement to build on the land within two years. So the option to buy time is limited, although I hope that the raw material (price) situation will at least stabilize in a few months. Also, there might be new KFW funding in 2023 for very sustainable construction, which we are aiming for.
(3) Give up the plot, since a project of this scale, with a budget close to a million, is economically possible but becoming increasingly difficult. The flip side is that building would then be off the table, at least for the foreseeable future, as there are no plots available in our preferred area anymore. Why am I even considering option three? Until last summer, the planned plot cost was 120k less; currently, an additional 100k easily disappears due to increased interest rates and lost KFW loan repayment subsidies.
I am usually very rational, but decisions under time pressure are never good. At least the decision whether to finance only the plot initially or the entire project is causing me a lot of concern. My wife is getting dizzy looking at the numbers, even though we can still responsibly afford it. But the question is at what cost.
I would appreciate any advice. Maybe others here are in a similar situation.
Thanks and best regards
We find ourselves in the following dilemma: My wife and I have been searching for a plot of land more or less intensively for the past 7 years. Our location options are very limited. In the usual public allocations, despite having two children, we often don’t meet the points criteria for winning building plots. However, I was able to secure a plot through a blind bidding process with the following details:
- 650 m² (7000 sq ft) in a prime location.
- High requirements for the building project: solar installation mandate, extensive green roofing, decentralized rainwater retention, etc.
The problem: The current situation with skyrocketing interest rates, general contractors who no longer can or want to build at fixed prices despite fixed price agreements, and the discontinuation of KFW funding. We (dual-income household, one civil servant) can still afford the project, but we have to decide within the next two weeks how to proceed.
(1) Launch the entire project with appropriate financing. We have a financing confirmation, but a reliable estimate of the final project cost is hardly possible. Our meeting with the general contractor is scheduled for today. The house is 95 percent fully planned (status summer 2021).
(2) Under conditions of raw material shortages and lack of funding, secure only the land for now and buy some time. The issue is less about missed loan repayments and more about interest rate trends and the requirement to build on the land within two years. So the option to buy time is limited, although I hope that the raw material (price) situation will at least stabilize in a few months. Also, there might be new KFW funding in 2023 for very sustainable construction, which we are aiming for.
(3) Give up the plot, since a project of this scale, with a budget close to a million, is economically possible but becoming increasingly difficult. The flip side is that building would then be off the table, at least for the foreseeable future, as there are no plots available in our preferred area anymore. Why am I even considering option three? Until last summer, the planned plot cost was 120k less; currently, an additional 100k easily disappears due to increased interest rates and lost KFW loan repayment subsidies.
I am usually very rational, but decisions under time pressure are never good. At least the decision whether to finance only the plot initially or the entire project is causing me a lot of concern. My wife is getting dizzy looking at the numbers, even though we can still responsibly afford it. But the question is at what cost.
I would appreciate any advice. Maybe others here are in a similar situation.
Thanks and best regards
B
Benutzer20012 Apr 2022 12:00I would also consider getting involved now if the financial situation fits. What the future holds remains to be seen – interest rates certainly won't go down any further and it won't be cheaper anytime soon.
What happens when you wait is something I am currently observing at a site in Berlin. A condominium planned at the beginning of 2020 for €10,000 per square meter, is now likely to actually be built and sold from summer onwards for €15,000 per square meter.
What happens when you wait is something I am currently observing at a site in Berlin. A condominium planned at the beginning of 2020 for €10,000 per square meter, is now likely to actually be built and sold from summer onwards for €15,000 per square meter.
First of all, thank you for the valuable input. These are exactly the considerations and discussions I need right now, even though ultimately the decision has to be made by myself.
This is currently the main consideration. I could almost finance the plot with equity. The question is what happens with the interest rates. In our example, we are currently at 2.5%. Last week it was still 2.1%. Our financing expert and the branch manager of my house bank, with whom I have a close relationship, both expect interest rates to rise moderately to around 3% by the end of the year. Many lenders now only offer daily updated rates. Quite an inconvenient time. Should we at least secure current conditions? Doing so through a forward agreement probably doesn’t make much sense for such a short period. It’s speculation.
We can still afford it, but only because we have now planned for different monthly repayments. Emotionally, I am different. I don’t have the typical dream of a home, and for me a house is something for the next 20–25 years. After that, when the children are grown, I will live somewhere else.
Yes, income-wise it’s fine. I have civil servant status, and my wife has a secure job. We are upper middle class (is that the right term?). Not rich, but very satisfied. We could afford delays, but in the end, it also comes down to willingness. Compared to our previous plans, we are already about 200,000 higher now. That doesn’t include any additional house costs yet.
The construction deadline means the project must be started within two years. The requirements are vague. What does “started” mean? Signing the contract? Being finished? That’s pretty flexible. Regarding the subsidy, I agree with you. That’s not a reason for or against.
Regarding lifetime: our children are 6 and 8. Right now, they need a garden and a nice environment—which we currently have in a rental. At the moment, I can’t imagine anything nicer than our current apartment, which we completely renovated, painted, wallpapered, and furnished three months ago. So much for the “right timing” topic. The problem is that we will need an additional room eventually. So the time here is without pressure but limited. In five years it will be too small. Two years ago, we bought a condominium in our desired area, which we currently rent out. It’s our “last resort” in case we need to move unexpectedly. We don’t want to live there because it has no garden, but at least it would work size-wise. It’s all quite complicated.
Right now, I tend to secure the plot anyway. That can be done without worry. The only risk I take is buying it at a price of 1.25 million due to the hidden bidding process. I am effectively paying a 25% premium compared to other regularly marketed plots. However, the location and layout are good. That is my only financial “risk” if I buy the plot first. Then I can calmly and without time pressure consider when to start building seriously again. If the general planner says that there is a lead time of 14–15 months anyway at the moment, it actually makes sense to start. From then until the excavators move in, about another 1.5 years will pass.
Pitiglianio schrieb:
Option 2.
Interest rates will rise only moderately over the next two years, if at all, more likely they will remain stable.
The raw material shortage will normalize somewhat again, along with prices.
Furthermore, time pressure is never a good advisor.
This is currently the main consideration. I could almost finance the plot with equity. The question is what happens with the interest rates. In our example, we are currently at 2.5%. Last week it was still 2.1%. Our financing expert and the branch manager of my house bank, with whom I have a close relationship, both expect interest rates to rise moderately to around 3% by the end of the year. Many lenders now only offer daily updated rates. Quite an inconvenient time. Should we at least secure current conditions? Doing so through a forward agreement probably doesn’t make much sense for such a short period. It’s speculation.
Hausbautraum20 schrieb:
But you already have two children who can use the house now, so the idea of “waiting” doesn’t seem very practical to me. Especially since you only have about two years.
As long as you can afford it, I would start building. But only if the project of owning your own home is really important to you. From a financial return standpoint, I don’t see any advantage, but emotionally it can make a big difference.
We can still afford it, but only because we have now planned for different monthly repayments. Emotionally, I am different. I don’t have the typical dream of a home, and for me a house is something for the next 20–25 years. After that, when the children are grown, I will live somewhere else.
HansDampf88 schrieb:
You seem to have a good income and could probably handle some additional costs or delays. Then I would start now.
If it’s tighter and an extra $100,000 would break you financially, I wouldn’t start anything under the current circumstances at all. You don’t even know what will happen in two weeks...
Yes, income-wise it’s fine. I have civil servant status, and my wife has a secure job. We are upper middle class (is that the right term?). Not rich, but very satisfied. We could afford delays, but in the end, it also comes down to willingness. Compared to our previous plans, we are already about 200,000 higher now. That doesn’t include any additional house costs yet.
WilderSueden schrieb:
What exactly are your construction deadlines? What exactly do you have to have completed by when?
I wouldn’t count on any new subsidies. Basically, new builds won’t be subsidized as excessively in the future as they were in recent years. I’d expect 10,000–20,000, which is hardly noticeable in your total budget. Therefore, I wouldn’t wait for funding that you don’t yet know whether you qualify for or what extra measures would be required.
I also want to bring up the topic of lifetime here. How old are your children? Every year you wait reduces the time you can spend together in the new house. Since your house is almost fully planned, I tend toward building as soon as possible. Provided, of course, that you are financially able to withstand additional price increases.
The construction deadline means the project must be started within two years. The requirements are vague. What does “started” mean? Signing the contract? Being finished? That’s pretty flexible. Regarding the subsidy, I agree with you. That’s not a reason for or against.
Regarding lifetime: our children are 6 and 8. Right now, they need a garden and a nice environment—which we currently have in a rental. At the moment, I can’t imagine anything nicer than our current apartment, which we completely renovated, painted, wallpapered, and furnished three months ago. So much for the “right timing” topic. The problem is that we will need an additional room eventually. So the time here is without pressure but limited. In five years it will be too small. Two years ago, we bought a condominium in our desired area, which we currently rent out. It’s our “last resort” in case we need to move unexpectedly. We don’t want to live there because it has no garden, but at least it would work size-wise. It’s all quite complicated.
Right now, I tend to secure the plot anyway. That can be done without worry. The only risk I take is buying it at a price of 1.25 million due to the hidden bidding process. I am effectively paying a 25% premium compared to other regularly marketed plots. However, the location and layout are good. That is my only financial “risk” if I buy the plot first. Then I can calmly and without time pressure consider when to start building seriously again. If the general planner says that there is a lead time of 14–15 months anyway at the moment, it actually makes sense to start. From then until the excavators move in, about another 1.5 years will pass.
H
HansDampf8812 Apr 2022 12:27Veltins schrieb:
Yes, income-wise that works well. I have civil servant status, and my wife has a secure job. We belong to the upper middle class (is that the right term?). Not wealthy, but truly satisfied. We could afford a delay, but in the end it’s also about the willingness to go through it. Compared to the previous plans, we are already 200,000 euros (about 215,000 USD) above budget. Additional house costs are not yet included in that.
If you are happy where you are now and don’t have an urgent dream of owning your own home, I wouldn’t put yourself through the stress in the current climate. I would secure the plot of land and then see how things look in a year before making a decision. The plot won’t disappear.
Judging by your username, you’re from the HSK area. I think when it comes to building deadlines or construction time frames, things are quite flexible there—they can definitely be extended.
Something else:
...and you already knew the current plot of land back then?
If not, which I assume: which designer plans a house without a plot? That is unprofessional and requires an explanation...
Veltins schrieb:
The house is 95 percent fully designed (as of summer 21)
...and you already knew the current plot of land back then?
If not, which I assume: which designer plans a house without a plot? That is unprofessional and requires an explanation...
HansDampf88 schrieb:
If you’re happy where you are now and don’t have an urgent dream of owning your own home, I wouldn’t put yourself through the stress given the current situation. I’d secure the plot of land and see how things look in a year, then decide. The plot isn’t going anywhere.
Based on your username, I assume you’re from HSK. I think building deadlines are quite flexible there — they can definitely be extended. I can agree with all that. At the moment, I don’t lack anything here. But in the medium term, it will get too tight with both children. I’m originally from Southwestphalia but no longer live in HSK. We moved toward the eastern Ruhr area.
Nemesis schrieb:
Something else:
...and did you already know the current plot back then?
If not, which I suspect: which planner designs a house without having the land? That seems unprofessional and needs an explanation... No, back then we planned on a similar plot. That fell through at the last minute during the land allocation process. The current plot is similarly shaped, even larger, and has no different requirements regarding construction. Of course, plot-specific work and everything up to the foundation stage will be handled individually. But the layout, size, and dimensions remain the same.
My crystal ball has a crack too, but I’m more inclined to think that if things stabilize, it will be at a high level. My gut feeling would be to continue planning once it’s in place. Review the current plans again. Do they still fit the plot? Do they still suit us? How expensive would it be now, and how much buffer do we still have? Will the bank cooperate, etc.? It might also be worth reconsidering some things to see if any “nice to have” features can be cut or postponed, which could help ease the situation a bit.
Similar topics