House construction with multiplier > 30?

Hello,

since we as a family (both around 40) need more space and unfortunately there are no purchase properties appealing to us in our region – many are rather older – we are considering building a house.

In total, we would spend about €465,000 for 155sqm with carport including land, kitchen, garden, etc.

Now, the cold rent prices for (older) existing properties in our region are rather around €7-7.50/sqm. This means the economic multiplier for our project is beyond 30.

We are actually not planning to sell, but in the above configuration we are about €120,000 above (formerly?) usual practical multipliers of about 25.

How do you assess this? Why should we do it / not do it? Heart over head?

Please don’t take this the wrong way, but I had to smile at your thoughts. In our rural area (Lower Rhine), the factor would be beyond 40, and significantly higher in large metropolitan areas.

You don’t buy a property based on the factor, at least not if it’s owner-occupied. Investors think about that when it’s a multi-family house (where a factor of 30 is also normal for new builds). An owner-occupied property always has something to do with a way of life, for which you are willing to pay a certain price. Aside from that, supply and demand determine the price.

What is the alternative to buying? Renting and putting the saved money aside (rent is usually cheaper than owning your own property)? Yes, you could do that, but you won’t save because the average person spends the money they have. Better to buy and "force yourself to save" - my opinion.

You can also wait until prices go back down. They will do so (in the not too distant future). Then the factor will be better, but financing costs will eat up that advantage again, as with falling prices there will also be an interest rate increase. This only helps if you have plenty of equity.

I wouldn't give a damn about any multiplier. The only question I would ask myself: Is the increased quality of life worth 465,000 euros to you?

Only you can answer to what extent it improves your quality of life. If there were comparable properties at this low rent price, then the increase is certainly low. If not, then higher.

Another question: Do you have suitable plots of land with a maximum price of 100,000 euros? Because the land can't be more expensive, otherwise the 465,000 euros probably won't work out.

I would consider how much I need to finance and by when. Do you have enough equity at 42? As an IT manager with such low rental costs, I would accept it. Otherwise, enjoy the low rental costs. In metropolitan areas, there is nothing for that.

This problem is probably faced by every builder right now. In the town where we will be building, the average rent is only 5-6 euros, which results in a factor of about 35 for us. Completely normal at the moment. No financing advisor has frowned for a long time just because in the past a maximum of 25 was considered the highest value in the industry.

Do you build more in rural areas or in/on a big city?