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
Exactly, let’s skip the fundamental debate because none of us knows whether we will get another 8 percent interest rate, or how far and how fast interest rates will rise this year.
We have decided to secure the plot of land. Then we will calmly review with the cost consultant how the project develops in terms of costs. At least the time pressure is off by then.
We have decided to secure the plot of land. Then we will calmly review with the cost consultant how the project develops in terms of costs. At least the time pressure is off by then.