Land purchase and house construction too risky in the current situation?

Good day everyone,

after a long time of silently reading along, I have to turn to you for advice in my first post.

My partner and I are currently living in an end-terraced house, which we can rent cheaply from my boyfriend’s parents – the parents themselves inherited the house. Since the size of the house is not sufficient for our long-term planning and a lot of money would also have to be spent on renovation, we have been looking for a plot of land for some time to build our own house.

Now, a building plot has been returned in a new development area of our municipality, for which we could apply. Since the plot comes from the municipality, it is significantly cheaper (€420 per m²) than the market price (€600-1000 per m²). All other plots are already built on or building applications have been submitted, so we rather cannot speculate that more building plots will become available.

Although the building plot is probably a unique opportunity, the feasibility in the current situation unsettles us extremely and we would appreciate your assessment.


General information about us:

F, 29 (Controlling) and M, 30 (Engineer) No children, but 2 children are planned in the next 4-6 years (hence the desire for more living space)


Financial situation:

Net income: €7000

[*]F: €3400 and M: €3600 - both 40 hours (additionally variable bonuses which we have not factored in)

Current expenses: €3400

[*]Fixed costs: €2200
[*]€600 rent, €350 additional costs including heating, internet and electricity, €500 cars including insurance, €400 retirement provision, €350 other fixed costs (insurance, Netflix, GEX etc.)
[*]Variable costs: €1200 (calculated very generously, we currently manage with much less)
[*]Living expenses, holidays, activities

Surplus: €3600

Equity capital: €250,000 - of which we would contribute €200,000 to the financing, a part of the remaining €50,000 is tied up in retirement provision and should remain there


Construction costs:

Plot: 621 m² at €420 per m²: €260,820 Purchase incidental costs: €18,257 House construction: 150 m² at €2600 per m²: €400,000 (unfortunately we only have an appointment with a construction company next week to understand whether this is feasible with a lot of own work) Cellar: €40,000 Garage: €25,000 Kitchen: €25,000 Outdoor facilities: €30,000

Total costs: €800,000

Financing requirement: €800,000 - €200,000 = €600,000 The bank would give us the loan at our desired rate of €2,500, but depending on interest rate changes, without special repayments the term would be between 30 and 35 years until contract completion.

What worries us greatly at the moment is that we have calculated the construction costs too tightly and that there will still be major price increases here. Also the long term – due to the child planning we see a higher rate as difficult, especially since we both earn about the same and will have strong losses due to parental allowance.

We have now been wavering for days between "seizing the unique opportunity for an affordable building plot in the village" and "the financial risk is too high in the current situation."

We would be grateful for assessments regarding our project and the planned construction costs.

Best regards, Julia

Hi,
you can initially finance the property flexibly and buy it with a relatively large equity share. Is there a building obligation in the area, if so, how strict?
some say construction must begin within [years]. Then you could wait out the currently very volatile period and save up properly again.
If necessary, plan with an architect in 2 years and already look for a shell constructor for the foundation slab and basement. This can also be paid from the equity available at that time if needed, and you have started; this can then be covered and secured but also stand idle for another year...

Hi,

yes, in that area there is a building obligation. From the purchase, we would have 1.5 years to submit the building application and from the building application 1 year until the start of construction or 1.5 years until completion. So there is a bit of leeway, but unfortunately no sitting it out and hoping for better times.

Best regards,
Julia

Calculate your surplus if one person is on parental leave.

And: ask yourselves or calculate why and if it is necessary to contribute to double retirement provision. The numbers seem quite high to me. That’s also good. But if you want to manage a housing project, the dual-track system could mathematically and permanently mean a no-go for the house.

So what definitely seems to be priced too low is the basement. At €40,000, the calculation is hardly feasible.

Otherwise, one has to say that you bring in very good equity and the salary is also very good. Of course, the desire to have children should/must be taken into account. During parental (allowance) time, one parent would fall to €1800, but this could still be the case even if you change the tax classes to 3/5 (this should be calculated beforehand), but it should work out that way. However, you would then have to see what would come out on the tax return afterwards.

The fact is, at least €1600 is initially deducted from the salary, plus a child costs money (child benefit alone is not enough). On the other hand, you still have enough surplus and possibly items where you can save a bit, e.g., €25,000 for a kitchen is already a rather high standard.

From my point of view, everything seems doable, but it should be well calculated. You should clarify where you would land price-wise with the house. How likely is it that you will get the plot? Do you have to apply or has it been offered to you?

Depends on the basement. Yes, a [WU Keller] that is supposed to be suitable as living space will probably cost about twice as much. With unfavorable soil conditions, even more. But if you are planning a purely utility basement, the ground is well-draining, and the building ground is well above the groundwater, that would be conceivable...