House construction still realistic despite rising interest rates / construction costs?

Hello everyone,
I spent a lot of time today reading through the topics and tried to abstract your valuable assessments to our current situation. Nevertheless, my wife and I feel the urge to explicitly face your neutral assessment of our planned project. So, without further ado, here are our key data:

We currently live rent-free in our owner-occupied apartment (purchased in 2015), whose sale we will notarize soon (buyer + price fixed). We have reserved a plot from the city, and the contract signing for the purchase is imminent if we decide positively on the project (529m² - €91,000 + €17,500 development costs). We are planning with a friendly architect in the planning phase and would like to hand over the execution to a general contractor, although we want to exclude floors, painting, paving work, and the (partly planned) wooden facade as well as possibly the photovoltaic system to carry out these ourselves.

General information about you:

[*]Who are you? A married couple from northern NRW (almost Lower Saxony)
[*]How old are you? M31 and F28
[*]Do you have children? No
[*]Are children planned? Yes (2)
[*]What do you do professionally? Engineer (M.Eng - mechanical engineering & software development) & Master optician - both permanently employed
[*]How many hours do you work? 35h (soon 40h again) and 35h

Income and asset situation:

[*]What income do you have (gross/net)? Gross: 5800 + 2800 // Net combined: ~€5600 including 13th salary
[*]How much child benefit do you receive? 0
[*]Other transfer payments like parental allowance, sick pay, etc.? 0
[*]How much equity do you have? Proceeds from the sold apartment: €245,000
[*]How much equity do you want to invest in the house project? €220,000

Expenditure situation:
Expenses already included in other positions can of course be omitted. This list is not exhaustive and can be expanded or summarized as needed. Please make sure to indicate all costs monthly, even if they occur only annually!

Housing costs:

[*]Current cold rent: €0 (apartment sold, 16 months rent-free)
[*]Current warm rent: €250 (housing charge still paid)
[*]Electricity: €80
[*]Gas: included in housing charge
[*]Water, sewage, garbage fees, street cleaning: included in housing charge
[*]Phone, internet, mobile: Internet + 2x mobile: €120 (savings potential available)

Mobility costs:

[*]Monthly ticket for bus and train: €50
[*]Car loan (or savings rate for a new car): €0 (electric car, paid in cash, 0 years old)
[*]Insurance: €50
[*]Taxes: €0
[*]Fuel: €0 (charging at employer & 7500 free km on long distance)
[*]Repairs: €25 (maintenance-free except tires)
[*]Other: €0

Insurance costs:

[*]Liability insurance (including pets) + household contents - €13.50

Living expenses:

[*]Groceries - €500
[*]Restaurant costs - €100
[*]Care/drugstore - €50
[*]Clothing - €150
[*]Club fees/gym - €20

Savings:

[*]Vacation - €175
[*]House - 0
[*]Retirement provision - ETF €400
[*]Hobbies/gifts - €100
[*]Other - whatever remained: special repayment on mortgage

Other expenses:

[*]Loans? €325 mortgage loan (will be canceled with sale)

Income and expenditure totals:

[*]Total income - €5600
[*]Total expenses - ~€2100
[*]Balance - €3500
[*]Of which sum cold rent and forgone savings (e.g. savings rate for house): €975

General information about the property:

[*]How large is the plot? 529m²
[*]What are the dimensions?
[*]How high is the standard land value? €190/m² (tendency rising)
[*]New build, old building (year built), house type? New build, requirement: 2-storey, flat roof (up to 10% pitch)
[*]Garages? Double garage
[*]How large is the house? (living area / usable area) 160m² + 56.5m² garage
[*]What is the market value of the plot and house after completion? Unknown to us

Construction or purchase costs:

[*]Plot costs - €91,000
[*]Development costs - €17,500
[*]Acquisition incidental costs (notary, court, property transfer tax, agent) - ~€8,000
[*]Construction or purchase costs (incl. architect, structural engineer) - €490,000
[*]Renovation and/or refurbishment costs - €0
[*]Additional construction costs (e.g., house connections, soil expert, construction power etc.) - €4,000
[*]Outdoor facilities/terrace, paths, garden design, fences etc. - €40,000
[*]Financing costs (e.g., fees or commitment interest) - €0 so far not considered
[*]Total costs - €650,500

Other costs:

[*]Kitchen costs - €20,000
[*]Furniture, lamps, decoration - €15,000
[*]Other "non-acquisition, acquisition-incidental, construction or additional construction costs" - €0 so far not considered

Cost summary:

[*]Total costs: €685,500
[*]Deductible equity: €220,000 + €20,500 muscle mortgage = €240,500
[*]Financing amount: €445,000

Necessary loan information:
(for multiple components please specify for each, for multiple variants please clearly distinguish):

[*]Loan amount: 445,000
[*]Loan type (e.g., annuity loan, bullet loan etc.): annuity loan
[*]Interest rate (p.a. nominal, otherwise effective): 2.46% nominal, 2.50% effective
[*]Fixed interest period: 30 years
[*]Residual debt at end of interest period: €69,000
[*]Fictional total term until full repayment: 32.6 years
[*]Initial repayment rate: 2.00%
[*]Monthly rate: €1650
[*]Are special repayments possible? (state amount) Yes, 3%/year (€13,350/year)
[*]Is a repayment rate switch possible? (conditions such as number, repayment rate range) 2x free, 2-4% repayment

What would you do? Especially regarding construction costs, we are very uncertain. Moreover, our pain threshold for the monthly rate before the interest rally was €1500. Now we are at €1650 with just 2% initial repayment, which is significantly above that. Our architect said he generously inflated the cost estimate and that we would manage with them "in the countryside" despite rising construction costs. The emergency plan would be to "drop" the garage, although we would lose additional storage space, which is already tight due to the flat roof and construction style without a basement.

What is your opinion on the key data? Proceed as is or scrap the house further and plan directly without a garage in these uncertain times?
We look forward very much to your constructive criticisms!

GU

Normally, painters and flooring are not included in the general contractor’s scope. Nor is the outdoor area.

whereby we floors, painters,

paving work

(partially planned) wooden facade

That is unwise, because the wooden facade must meet the calculated energy standard, and no thermal bridge is allowed to form. It’s not like you hang wood in front of plaster. Behind the wood there is foil and insulation as part of the shell construction; as a layperson, I would let the professional handle that.

remove

……

incidental building costs (e.g. house connections, soil surveyor, construction electricity etc.) - 4000€

You forgot a zero there. You also unfortunately forgot the material for the electrical installation! Do you have plans for children? What about the salary then?

I find your cost planning refreshingly realistic. Your household net income should comfortably cover the 1650 installment. The initial repayment is not ideal, but over the years there will probably still be salary increases for both of you.

I find the ancillary building costs a bit tight at 4k. But it depends on what is included in your fixed-price contract / what you pay yourselves and what you don’t. Development costs of 17500 might be accurate, but could also be higher, depending on soil conditions / slope or similar. Have you already included your materials for your own work in the 490k purchase costs? Like floor coverings, walls, paving stones, etc.?

Normally, the general contractor doesn’t include painters and floor coverings. Nor any exterior landscaping.

That’s unwise, because the wooden facade must meet the calculated energy standard, and there must be no thermal bridge.
It’s not like you just hang wood in front of plaster. Behind the wood there is foil and insulation as part of the shell, and as a layman, I would let a professional take care of that.

……

You forgot a 0 there.

You also forgot the materials for the DIY work!

Do you want children? What about the salary then?

Hey, thanks right away for your feedback! I think we didn’t express ourselves clearly enough. The costs set are purely an estimate from our architect, so including floor coverings/painting/paving etc. We needed this cost estimate for the loan application to still secure the listed interest rate. This is at the Allianz (yes, I have read the Allianz threads ;-) ) - they now need 7-8 weeks for the review, during which we are getting offers from the three general contractors we have spoken to so far and with whom we have personal contacts, all of whom could start around September. Unfortunately, the plans simply weren’t that far along earlier for us to have done that before.

We will take your tip about the wooden facade into account and consult extensively beforehand with my brother-in-law (carpenter, civil engineer, has long experience in construction management at a timber prefabricated house supplier). He has already shown us the structure of such a facade once and asked for a quote for the area (~100m²) including substructure.

The material costs for the DIY work should therefore already be included in the construction costs; we have only researched or conservatively estimated and applied the saved working hours and wages. That reminds me that we forgot to mention something very important. According to the city’s requirements, we must build a KFW40+ house, so with photovoltaics + storage and a lot of insulation, which will probably also strongly drive up costs. Another important piece of information is probably the obligation to take district heating, which means we do save on heating costs but will in the future pay about €50 per month base charge for district heating (handover station provided by the city). The cost increase of the district heating is contractually fixed and depends on statistical indices/changes (in labor costs and gas prices).

We have indicated a desire to have children and know that temporarily my wife’s salary will drop or be reduced in the long term. This issue will likely become relevant in about 3-4 years. Fortunately, she can flexibly return to work part-time in her job, and I still have some room for career advancement and benefit from SK3. But we are aware that then there won’t be much left of the currently fairly comfortable monthly surplus. That is also why we previously set a top limit of €1,500 monthly rate.

What would you do?

Serious question? With the given framework, you are among those who can definitely afford the house. Even with parental leave (although it gets tighter with kids). If not with these framework conditions, then when? Interest rate security for 30 years and sleeping worry-free in the new house.

Great equity, great income. Go for it. Take another critical look at the construction costs.