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
The likelihood that the temperature trends of medium-term price movements and daily market fluctuations will produce a more favorable timing within the next five years, I would consider purely wishful thinking. I don’t see any worthwhile reason to wait at all.
Aren't the subjunctive umlauts missing here? Because later in the thread, it still sounds like the race isn’t decided yet...
So you’re betting on being the winning bidder with a 25% premium? Is that still worth it under the assumption that your family, currently renting, already enjoys a perfectly satisfactory situation?
Given your comfortable position—1. not having to escape a dark, cramped hole by owning your own home, 2. lack of financial hardship, and 3. already owning property—I’m sure most of your fellow land seekers will envy you for not falling through the cracks of the local resident priority schemes.
[Correction: only most, not all—unfortunately, many of “my” land seekers have the “disadvantage” of not being considered in need of public assistance due to good education and corresponding income]
https://www.instagram.com/11antgmxde/
https://www.linkedin.com/company/bauen-jetzt/
Veltins schrieb:
Now I could secure the contract for a plot of land through a sealed bidding process
Aren't the subjunctive umlauts missing here? Because later in the thread, it still sounds like the race isn’t decided yet...
Veltins schrieb:
The only risk I’m taking is the fact that I’m buying it at 1.25 times the price through the sealed bidding process.
So you’re betting on being the winning bidder with a 25% premium? Is that still worth it under the assumption that your family, currently renting, already enjoys a perfectly satisfactory situation?
Given your comfortable position—1. not having to escape a dark, cramped hole by owning your own home, 2. lack of financial hardship, and 3. already owning property—I’m sure most of your fellow land seekers will envy you for not falling through the cracks of the local resident priority schemes.
[Correction: only most, not all—unfortunately, many of “my” land seekers have the “disadvantage” of not being considered in need of public assistance due to good education and corresponding income]
https://www.instagram.com/11antgmxde/
https://www.linkedin.com/company/bauen-jetzt/
If you buy from a municipality, you have to sell back to the municipality at the purchase price. So you lose the property transfer tax and notary fees, but you avoid paying an additional 25% over the market price. Solar panels, green roofs, and stormwater retention are now almost standard everywhere. Unlike those who believe that property prices might fall, I think prices will not decrease. As long as nothing unusual is installed, you will be able to sell the house at any time for a higher price. If necessary, even while it is still a shell construction, without a loss. I wrote this in another thread: where I live, there are 50 applicants for one building plot, and 10 of them probably have no problem paying 150 or 200% of the price per square meter. Of course, for houses over 1 million (USD), the pool of buyers is smaller, but it still exists.
@mayglow You’re absolutely right. I’m not yet thinking far enough ahead to critically question individual items because it might get tighter. We went through all the items back then and already clustered them into priority A, B, and C. To me, that is part of proper planning.
No, I have been informed that I was the highest bidder and that I should submit the documents for notarized confirmation. That makes things so difficult, because I have to decide whether to finance the entire project now, or just the land initially, or not at all. So right now, the thought is really to secure the land, get the notarization and financing wrapped up, and then calmly move forward with the house project. Essentially splitting the land and construction phases, since estimating the total financing volume is currently so difficult.
You are completely right about the rest. I do not want to complain here either. The opportunity to buy the apartment two years ago was a lottery win. We won’t fall through the cracks, and there are families who are financially strained or simply under severe housing pressure. Those are completely different circumstances. I am truly grateful for the opinions and for being able to look at certain decisions from all angles. Not everything that is financially feasible is also sensible.
About 15 to 30 applicants compete for each plot here — these are the already filtered candidates who remain in the running. The total number of initial applicants is much higher. The pressure will remain high even in these times, although some projects may fall through the cracks. Regarding the municipality: the regulations are vague, but in the worst-case scenario I write off notary and land transfer tax, although not even that, since we also have the situation that existing properties are sold at higher prices than new developments. At least when calculating gross prices including land transfer tax and possibly brokerage fees.
Maybe to put it more abstractly: it’s less about what is financially possible in general — although of course budget limits are set — and more about the sensible approach. I struggle with the time pressure (for the land) to prepare financing for the entire project when the house-related costs are hardly reliably estimable. Hence the idea to possibly secure the land first. That would remove the time pressure, and the “big” financing would then relate to the house project.
11ant schrieb:
The likelihood that the temperature curves of medium-term price trends and daily market climate will produce a more favorable timing within the next five years I would dismiss as wishful thinking. I don’t see any “worthwhile” reason to wait at all.
Are there not conditional markers missing? – because further in the thread it doesn’t sound like the race is decided yet...
So you’re betting on being the winning bidder with a 25% price premium?
No, I have been informed that I was the highest bidder and that I should submit the documents for notarized confirmation. That makes things so difficult, because I have to decide whether to finance the entire project now, or just the land initially, or not at all. So right now, the thought is really to secure the land, get the notarization and financing wrapped up, and then calmly move forward with the house project. Essentially splitting the land and construction phases, since estimating the total financing volume is currently so difficult.
You are completely right about the rest. I do not want to complain here either. The opportunity to buy the apartment two years ago was a lottery win. We won’t fall through the cracks, and there are families who are financially strained or simply under severe housing pressure. Those are completely different circumstances. I am truly grateful for the opinions and for being able to look at certain decisions from all angles. Not everything that is financially feasible is also sensible.
Grundaus schrieb:
If you buy from a municipality, you have to return it to the municipality at the purchase price. So you basically lose land transfer tax and notary fees and cannot add the 25% above market price. Solar, green roofs, and rainwater retention are now almost standard everywhere. Contrary to those who think property prices may fall, I believe prices will not drop.
About 15 to 30 applicants compete for each plot here — these are the already filtered candidates who remain in the running. The total number of initial applicants is much higher. The pressure will remain high even in these times, although some projects may fall through the cracks. Regarding the municipality: the regulations are vague, but in the worst-case scenario I write off notary and land transfer tax, although not even that, since we also have the situation that existing properties are sold at higher prices than new developments. At least when calculating gross prices including land transfer tax and possibly brokerage fees.
Maybe to put it more abstractly: it’s less about what is financially possible in general — although of course budget limits are set — and more about the sensible approach. I struggle with the time pressure (for the land) to prepare financing for the entire project when the house-related costs are hardly reliably estimable. Hence the idea to possibly secure the land first. That would remove the time pressure, and the “big” financing would then relate to the house project.
Veltins schrieb:
because I have to decide whether to finance the entire project now, just the land first, or not at all.Didn’t you say you could pay for the land with equity? That would at least remove the time pressure for now. Variable financing for the land could also work if you don’t want to commit to the whole project yet. (As for the rest, I honestly don’t know how quickly you could just pull that together. It probably depends on the overall planning situation at the moment.)Conclusion: In your situation, I would complete the land purchase and start a new thread here (linked), where you can share the specifics of the plot (as well as the one originally planned) and the house design. Then we can work together to identify where the project might be scaled back or downgraded to ease the financing.
https://www.instagram.com/11antgmxde/
https://www.linkedin.com/company/bauen-jetzt/
https://www.instagram.com/11antgmxde/
https://www.linkedin.com/company/bauen-jetzt/
B
BackSteinGotik12 Apr 2022 16:32Grundaus schrieb:
Unlike those who believe property prices might fall, I think prices will not decrease. As long as nothing unusual is installed, you will always be able to sell the house for a higher price. No, of course not—prices can never fall, interest rates can never rise, and thanks to TINA, markets keep rising forever. History alone shows this has been the case for 500 years now.
Unfortunately, there are no concrete numbers here, especially regarding the ratio of land costs to building costs. There is already about 25% extra margin built into land prices, and since the municipality auctions the plots, there was probably a substantial markup included under normal conditions. Don’t forget, the central bank already estimated up to 40% of the prices around housing last year to be overheated. The war in Europe plus the COVID impact in China add significant temporary increases, which won’t have to be paid in five years’ time. The idea that one can always exit anywhere with a profit is probably wishful thinking. Every bubble bursts, every boom ends—and the last to sell usually suffer the most losses.
The fact is that interest rates have risen sharply, and households are already under significant pressure. How further price increases across the market are supposed to happen is unclear to me. We are only at the beginning of this crisis, and there’s no quick end in sight. In just two years, the first properties with 10-year fixed-rate mortgages and 1% principal repayment (which were taken out when interest was lower) will come up for review. Those owners also thought they could sell at a high price anytime. It remains to be seen whether their household budgets can handle this or if there will be enough buyers willing to take part.