Is building a house becoming cheaper now?

Hello,

we obtained an offer from a house construction company for the building of a solid house in mid-May; the price was one quarter higher than at the beginning of 2021, which is why we initially decided against it.

Currently, building material prices are falling again; what is your assessment, will the general contractors be able to offer their houses cheaper again soon? Leaving aside the credit and rising interest rates.

One more question
House construction companies often offer a 12-month fixed price guarantee, but if the 12 months are not met, the current construction prices apply, if I remember the contract documents correctly.

Of course, no one can look into the future. But there are two scenarios, with the latter one being the more likely in my opinion.

Scenario 1:
House construction will be cheaper in a year because, due to high interest rates and a poor economic situation, orders for general contractors (GUs) are declining. See today’s Tagesschau. The number of building permits for single-family homes fell by 17%!!! in the first half of the year, and the first two months without war-related effects are not even included yet. If demand decreases, then theoretically prices should also fall.

Scenario 2:
House construction will become more expensive because the high raw material prices cannot be magically eliminated and building zones for new single-family homes are no longer politically desired. A single-family home will be a privilege of the wealthy upper middle class who already have money. Because even in a crisis, the rich get richer and the poor get poorer. Unfortunately, that is the way it is. Therefore, the GUs that survive the crisis will build high-quality, expensive houses for that clientele. The rest can look around the used market, where there will certainly be some bargains. Because expiring financing and tightly financed loans will now burst the dream amid inflation.

That is why you should simply strike in the coming years with used properties. A new build will only be possible if you already have a lot of equity. And even with used properties, younger homes will be bought by those with good credit ratings. The others can indulge themselves with the poorly insulated houses under <20 years old. That will be the sad reality.

It could become cheaper again.

Today a client told me that a GU would either have to offer him an exorbitant price for NOW or the project would only start in the middle of next year. The order books are apparently quite thinly filled by now. So yes, it will get cheaper. But only by mid-2023. Before that, it will stabilize at a high level.

The question is of course also how much room for improvement there is. Many are probably still sitting on their properties hoping that there will still be a window before the construction obligation. And for the returned properties, interested parties will quickly be found again in better times. Recently, there has been a slight increase in people who unexpectedly topped the point procedure and now want to rectify that accordingly.

Interest rates will rise, the euro will continue to fall.

The euro decline will further fuel commodity and energy prices. Real income will decrease.

The prices at the GUs will not decrease; there will initially be a zero round. Many GUs have not made the profits they wanted/had to make due to fixed prices and exploding costs.

A 17% decline sounds like a lot. In reality, it is only the shift from "complete overload of the industry" to "we have enough work all year"...