Construction costs and financing for apartment or house

2016-08-31 15:08:19

And once again on the saying "Location Location Location": It doesn't only have advantages! The risk of being affected by a real estate bubble or its burst is highest precisely in the so-called A locations! The plot in Bitterfeld for €35/sqm loses 10% to €31.50/sqm. That's bad, but bearable. But what happens when the plot in Munich falls by 10% from €1400/sqm or even much more because the bubble fully bursts? Then the refinancing is at the latest over because the loan-to-value no longer fits (in the worst case, it would be over 100%) and due to the credit crunch, only a few banks are willing to continue financing such properties.

This whole thing happened only 8 years ago and is currently happening again in London, thanks to Brexit.

Only high equity, high initial repayment, and/or long fixed interest period can help against this. One of the three components is mandatory! Otherwise, after the first fixed interest period ends, if a (worst case) 100% financing is built up now, each loss in property value can mean the knockout. So not only losing the house but possibly leaving with debt.

2016-08-31 15:12:10

Why? I just wanted to say that even for "normal" houses, huge sums are paid if the location is right, and according to the OP it is the best location. A later buyer can still expand, modernize, etc. the house.

The "huge sum" in your example typically does not come from the house value but is derived from the land value. If the house is, for example, located in an inner city area that may also be used/commercially developed and/or can be newly developed with a significantly larger house (more floors!), then the old property gets demolished with the wrecking ball and the land is replanned – the house value tends toward zero (which is also incomprehensible to many), and this happens quite often.

Best regards
Dirk Grafe

2016-08-31 15:12:18

That has to be decided by everyone individually. I don't see it as necessary to insure this. Burnout has happened to several people in my circle. But it is not a permanent condition. After 6 months, people are back. The disability insurance pays exactly nothing; a daily sickness allowance would be the right thing for that. I also skipped that during my self-employment (I initially planned on having it) and instead built a financial cushion – just like you. Depression is also such a thing. The insurance will drag you through all instances before paying a single euro because such illnesses are simply not visible. Then, right on time after 6 months, you get happy pills and bam, you are considered fit to work on paper again! These are risks I meet not with insurance, but with prevention. If I work too much, change in character, etc., my wife tells me. Pull the emergency brake before it's too late. Social network instead of insurance contracts. Dirk's idea that you don't have to pay off the house at all, I support. If people see homeownership as the ideal (or idealized) form of provision, even see it as a life goal, then you don't have to start there. That's just a different mentality. Use it, yes, own it – why? Especially since, regarding returns, the calculation rather argues against ownership.

Basically, I agree with you on all points. Especially the last paragraph could have been written by me. Regarding insurance (of course I also have a high daily sickness allowance and extra hospital daily allowance). I am aware that in case of emergency, the disability insurance will try to avoid paying. Then you need a good lawyer. At that point, I just "play the game." Personally, the 500...600 EUR per month for disability and daily allowances don't bother me. I pray I never have to use these insurances and that this money was "burned." Then everything is fine.

2016-08-31 15:13:29

The "immense amount" in your example usually does not result from the house value but is derived from the land value. If, for example, the house is located in an inner-city area that may also be used/built commercially and/or can be newly developed with a significantly larger house (more floors!), then the old property gets demolished with the wrecking ball and the land is replanned – the house value tends towards zero (which is also incomprehensible to many), but it happens quite often.

Best regards
Dirk Grafe

Thanks for the explanation of apples and oranges

2016-08-31 15:16:46

If you can’t build a house (just the house) for 400,000, then you wouldn’t need to start anywhere else under half a million either...

As soon as you move away from the standard range and plan more individually, prices will noticeably increase.

2016-08-31 15:17:10

I'm more on the Peanuts side as well. The house should be buildable for 350,000,-, but not KfW55, with a carport instead of a garage, and you won't have a luxury bathroom then. We once planned 300,000,-, but we are now at 365,000,- for 200 m² (184 m² according to Wohnflächenverordnung) with a garage, without a basement, with the garage accounting for 40,000,-. So for us, the price per m² is about 1,600,-, although we have quite high-quality fittings, but also no KfW standard.

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Construction costs and financing for apartment or house

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