Financing house construction / Land (self-financed) overpriced?

Hello everyone,

we are one step further in the property search.
At the moment, we have our eye on a plot of land in the Berlin surrounding area with public transport connection. The standard land value is €320/sqm for an area of 1500 sqm; it is built on with a house (basement, approx. 60 sqm living space). This, as well as a shed, a sewage pit, and possibly an in-ground pool (90 m3) must be removed. We could finance this for €440,000 (i.e. €293/sqm) plus incidental purchase costs from equity + installment loan.
The house construction would only be possible in about 2 years because the owner wants to move out then (therefore no financing of land and house together, the installment loan would then be paid off).
In a similar location, the sales prices per sqm are currently more likely between €350-400/sqm (for plots about half the size).

However, we are a little uncertain after we asked Dr. Klein for an assessment of the plot and the equity creditable from it. Apparently, that would already be a steep price when you consider the demolition.
Is this objectively a too expensive price?

In addition, we were only promised an equity portion of €350,000 from the plot for the later house construction.
Can anyone explain where the difference of €90,000 (or €130,000 if you take the current standard land value) comes from?
Furthermore, Dr. Klein told us that demolition costs cannot be financed through a construction loan but must be financed through equity. Is that really true?
Which other ancillary building costs cannot be financed through a real estate loan?
Are, for example, garden and kitchen also financeable through construction financing?

Is it calculated a bit too tight if we want to have the construction project built as a ready-to-move-in house by a developer or architect (i.e. fixed total price) and want to finance it with the land as equity?

Thank you for an initial assessment
Stephan

Hello, does the house with the land and demolition costs cost 440k or are the demolition costs added on? If pure plots of land from 350 sqm cost and your plot plus house is well below this value, it's already strange.

The discussion about the land value we just had. Oversized plots are not completely valued as building land (= standard land value). Normally, it is e.g. 600 or 800 sqm. Or plot width x 30 or 40m depth. The rest is considered non-buildable garden land, which therefore only has a significantly lower value. Exceptions are e.g. villa areas, where one expects an appropriate plot for the house. As a small excursus why Dr. Klein values the plot lower. You can also see that smaller plots are correspondingly more expensive (the ratio of house to plot is also different there).

Calculation example for you: 800 sqm plot at €400 = €320K + 700 sqm garden land at €200 = €140K minus demolition €20K = purchase price €440K

Furthermore, Dr. Klein told us that demolition costs cannot be financed through a construction loan but must be financed with equity. Is that really true?
Which other ancillary building costs cannot be financed through a mortgage loan?
For example, can garden and kitchen also be financed through construction financing?

Basically, everything can be represented through construction financing. It’s all a question of the loan-to-value ratio and the presentation. Demolition does not increase the value of the house. Kitchen neither.
To simplify, just say that you provide €60K less equity and thus pay for demolition and the kitchen. It’s the same as if you put the equity directly into the construction and then want to get the €60K back from the bank.

We just had the discussion about the land value.

... funnily enough also in the Berlin surrounding area. ;)

Is that objectively too high a price?

That is also a question that has been coming up here more and more frequently lately. You are in a MARKET, which according to economic definition is the (ideal) place where supply and demand meet. At the moment, demand exceeds supply by a large margin (almost everywhere in Germany), so higher prices are demanded and paid, which is why the answer to your question can only be: If the land is worth that price to YOU and you can pay it (including demolition and the subsequent new construction), then it is not too expensive. Otherwise, better leave it alone.

Is it a bit too tight of a budget if we want to have the construction project built as a ready-to-move-in house (i.e. fixed total price) with a developer or architect and want to finance it with the land as equity?

That very much depends on your planned construction project, but from today’s perspective I would expect that in two or three years, there won’t be a very large detached single-family house with good equipment for 350,000 EUR all-in.

Hello, does the house with the land and demolition costs cost 440k or are the demolition costs added on? If pure plots of land from 350 sqm cost that much and you get your plot plus house well below this value, it’s already strange

The demolition costs are added on, yes. But somehow now there is something on almost every building plot around Berlin that needs to be demolished...

The one question is what would be too expensive. Apparently, there is no cheaper alternative. Therefore, the question is rather to do it or leave it. That is answered by your affection for this property and your financial possibilities. I wouldn’t worry about overpricing and would go for it if I wanted the property. Instead of putting all the equity into the purchase, I would finance a bit more to keep liquid funds for the demolition. With the current interest rates, that’s no problem either. That gives you the flexibility not to have to think about how the demolition will be financed when the time comes.