House construction costs in 2024, 2025, or not at all?

2023-05-12 09:24:20

Having children and building a house at the same time doesn't have to be mutually exclusive. When I built my first house, I had a tiny baby and was on parental leave. And as luck would have it, I now have another tiny baby during the current house construction and am on parental leave again. It all depends on the specific numbers. Unfortunately, the current figures are much less in your favor compared to two years ago. We were still able to finalize the financing with a 2% repayment rate so that we could manage well even during parental leave. Then with a bit less buffer for savings and reserves for that one year. P.S.: Don’t forget, saving doesn’t stop after building the house. Houses aren’t brand new forever. For us, there was still a 2 before the decimal point, whereas with current financing applications it’s probably more like a 4. We wouldn’t finance to the same extent under today’s conditions. The bank would probably still approve it, and we also have a slightly larger household net income than you do even during parental leave (we’re also a few years older). But I wouldn’t sleep well with that. I’m not a fan of the blanket “no more than 30% of net income for the house” rule. I think that neither applies to very tight incomes (there it could already be too much), nor to very high incomes (if I earn 8k net, my living costs don’t necessarily increase proportionally). Our financing is structured so that we still manage well during parental leave—the belt is a bit tighter, but it’s not choking yet. And when I go back to part-time work, things look quite relaxed again. Potential salary increases and such are not included in this calculation. That’s only somewhat sensible anyway. Nowadays, you no longer pay off financing after 20 years, not even on paper. And if more salary comes in, I’d rather use it to become debt-free faster. Who wants to pay off a large loan until shortly before retirement (or even beyond)? Statements like “we’re financing today on the edge, the higher salary later will fix it” I consider dangerous.

2023-05-12 09:51:18

Thanks to you all until then, nice discussion! :)

We definitely want to continue living in our small village; moving is actually not an option for us in the future because we feel too comfortable here. With only about 400 inhabitants, this unfortunately also greatly restricts the possible purchase of existing properties, as very little useful real estate comes onto the market here. If we really see in 2024/25/26 that building isn’t going to happen, we would probably have to think about it, whether we like it or not.

My mother is now remarried, and her husband brings a considerable amount of stocks into the marriage. He has basically indicated that he wants to support us here, because we have a very good relationship. The other sentence may have been phrased a bit poorly. We recently got married, which also cost a bit of money. From now on, the plan is to save as much as possible - let's see how we manage that in the coming months.

I mentioned that above in a side note. The land is financed variably, back then at an interest rate of about 1.5%, today we are at about 3.5%, with a tendency to rise further for now. We did it that way back then because we assumed we could really build in 23/24 at a similar interest rate level. Unfortunately, due to the interest rates, things have turned out differently than expected, but hindsight is always 20/20...

Thanks for your detailed input! I very much expect that we will have a household net income of >6,000 € in 2025. My supervisor has already indicated that I should be promoted to team leader within the next 18-36 months. These are still unhatched eggs, but the prospect is there and I feel very comfortable there.

It remains exciting, one way or another ... :D

2023-05-12 09:52:17

I don’t see it that way. Price declines for non-renovated properties in urban areas of up to 30%. If I now buy a house with a gas boiler, replace it, and carry out the possibly necessary energy renovations (upper floor/roof insulation + small stuff), I can still live in a nice house for a long time without a high investment. Yes, heating costs may rise. But they do so also in a rental apartment with gas heating and without insulation. And in 5-10 years a) creditworthiness will look different and b) availability + prices for heat pumps and insulation (which by then will be mass products) in my opinion will be significantly lower.

I can only speak for this area now. The asking prices have come down from completely overblown to the level of the end of 2020. That was not a bargain even back then. And it’s not just the energy factor... many of the houses still have original bathrooms that are happily rotting away, and so on. Thousands are just ticking by there as well. Back then, new construction was about as expensive as purchase + purchase side costs + partial renovation. That no longer quite applies now, but with a budget under 500k you can’t even start here with existing properties, even with a minimal renovation. That would still be too much for the OP.

2023-05-12 10:07:10

From now on, the plan is to save as much as possible -

I would say the same - whether into the property or anything at all :)

He has basically signaled to support us here,

Well, honestly: who expects that someone who expresses their support actually sells stocks or has to give up their retirement provision, if they themselves earn well and have salaries of 5 or 6000€ to show for. I would consider support if the first baby equipment needs to be purchased or something in the four-digit range is missing, but no more. Maybe you can get the carport gifted...
Keep your hands off your parents' retirement provision!

A move is basically out of the question for us in the future, we feel too comfortable for that.

If you want to achieve something, you have to move sometimes. Who says that you can’t increase the feeling of well-being in another place? What does the feeling of well-being mean when financial support comes from the family?

2023-05-12 10:16:17

Having children and building a house at the same time does not have to be mutually exclusive. When we built our first house, I had a tiny baby and was on parental leave. And as luck would have it, during the current house construction, I again have a tiny baby and am on parental leave. It all depends on the actual numbers. Unfortunately, the conditions are currently much less in your favor than they were two years ago. We were still able to finalize the financing with 2% repayment so that we could manage well during parental leave, though with a slightly smaller buffer for savings and reserves for that one year. P.S.: Don’t forget, saving doesn’t stop after building the house. Houses aren’t brand new forever. But at the time, we also had a 2 before the decimal point, whereas current financing applications probably have more like a 4. We wouldn’t finance the same amount under today’s conditions. It might still be approved by the bank, and we also have a somewhat larger household net income than you even during parental leave (and we are also a few years older). But with that, I wouldn’t sleep well anymore. I’m not a fan of this blanket “no more than 30% of net income for the house” rule. I find it doesn’t apply for very tight incomes (there it might already be too much), and certainly not for very high incomes (if I have 8k net, my living expenses don’t necessarily rise proportionally). Our financing is structured so that we can still get by well during parental leave—the belt is tightened a bit, but it’s not choking yet. And when I go back to part-time work, things look quite relaxed again. Potential salary increases, etc., I haven’t factored in. That’s also only conditionally sensible. Nowadays, you don’t pay off financing after 20 years anymore, not even on paper. And if more salary comes in, I would rather use it to get out of debt faster. Who wants to be paying off a big loan until shortly before retirement (or beyond)? I consider calculations like “we finance living beyond our means now; the higher salary later will fix it” dangerous.

As you say... building a house and having children at the same time does not have to be mutually exclusive—unfortunately 100% so in the current phase, especially given the conditions. We are currently reducing our repayment rate during parental leave so that we can live better in the coming years (possibly with a second child). But we can only afford this because we financed at 1% interest. Anyone financing today simply can’t repay anything anymore, so in my opinion, the financing isn’t feasible. Definitely possible as a couple without children (and no plans for any), but practically impossible with a desire for children under “normal” conditions.

2023-05-12 10:17:27

In the end, everything depends on how inflation and interest rates develop. 6,000 EUR in 2025 with 4% interest and an inflation rate of 25% compared to 2020... that corresponds approximately to 4,500 EUR in 2020.

And with 4,500 EUR net income and 1-2 children, it was already a bold decision in 2020.

I see equity as particularly critical. This is very, very important with high loan interest rates. The bank usually wants to see 20%...

So you should start saving money wherever possible now. I don't see financing as realistic with less than 100,000 EUR equity...

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House construction costs in 2024, 2025, or not at all?

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