Property purchase / financing in the current situation - yes / no?

Hi,

I can agree with the previous speakers.

Plots of land are "scarce," and if one is for sale, you often pay 50% more here than it’s worth. Because you can build a house on it exactly how you want!

So if you can get the plot cheaply (or without significant markups!), then buy it.

I think, depending on the region, that land prices will continue to rise by 5-15% annually, meaning if you were to buy the plot in 3 years, it would probably be correspondingly more expensive, and the ancillary purchase costs would also apply (but would also be correspondingly higher!)

And if you are supposed to start building in 3 years, then shortly before that you can do the excavation and start with the foundation ;) and the construction can take some time as well.

Since interest rates have risen so much now, many contractors cancel their large orders = so I think in 1-2 years it will be easier to get craftsmen + that prices regarding labor costs will normalize... as for material prices, that’s still uncertain...

One more note:
if you can save a lot until the start of construction?
then do a partial building savings contract. So you can use that as "equity kicker."

Possibly part of the equity + monthly savings rate. If you can save 30%, you would get 70% as a loan at 2.35%.
An advantage here is also that if you handle it cleverly, you only need to finance 80-85% from the bank, instead of 90-95%,
because then you also get a cheaper interest rate in 3 years.

If questions now arise as to whether you could manage more through the building society, then probably not. Because until allocation, you have to collect some points, it takes longer with higher amounts, and it also has to be repaid faster.

I would do it.

The risk we would take if we bought the property now but could no longer develop it due to the current situation is the loss of taxes and interest if we returned the property to the municipality. That is about 18,000 euros – a considerable amount

But how do you arrive at 18,000€? It should be much less, right?

I would do it. But how do you come to €18,000? It should be significantly less, right?

Additional purchase costs €6,000-7,000€ and I think for the rest it would be the interest for the land financing, and compensation in case you have to sell it again after 3 years.

Thank you very much for all the responses. In fact, I expected more resistance. I am still wondering how we are supposed to come to a €1,800 installment if we assume, for example, that we need a €500k loan (which I don’t consider unrealistic). Then, with 2% repayment and 3% interest, the installment is already more than €2,000. On top of that are the monthly additional costs. Or am I somehow wrong here? What we currently have as equity, we can’t put entirely into the land purchase, since from that, the incidental purchase costs and then the planning costs still have to be paid; besides, for example, if the car ever breaks down or something similar, there should always be something saved on the side.

I would do it.

But how do you get to €18,000? It should be significantly less, right?

I come to €18k if I calculate 7% incidental costs for the purchase + interest for the land financing + property tax (which would apply from January 2023). In addition, there is another 7% incidental cost in case we have to return the land to the municipality (release reservation). Unfortunately, we would have to bear the costs for tax and notary then. As far as I understand, these 7% then compulsorily come up again, right?

Morning,

I can agree with the previous speakers.

Land plots are "scarce," and if one is for sale, you often pay 50% more than it’s worth here. Because you can build a house on it as you like!

So if you get the plot cheaply (or without significant premiums!), then buy.

I think, depending on the region, that land prices will continue to rise annually by 5-15%, meaning if you were to buy the plot in 3 years, it would probably be more expensive accordingly, and the incidental purchase costs would then also apply (but also correspondingly higher!)

And if you are supposed to start building in 3 years, you can do soil excavation shortly before and start with the foundation slab ;) and the construction may take some time.

Since interest rates have risen so sharply now, many builders are canceling their large orders = I think you will be able to get craftsmen well in 1-2 years + that prices for labor will normalize... as far as material prices go, that is still uncertain...

One more note: if you can save a lot until the start of construction? Then do a partial home savings contract. So you can use it as “equity kicker.”

Possibly part of the equity + monthly savings rate. If you can save 30%, you would get 70% as a loan at 2.35%. The advantage would also be that if you do it cleverly, then you only have to finance 80-85% at the bank instead of 90-95%, which also means getting a cheaper interest rate in 3 years.

If questions arise now about whether you could also do more via home savings banks, then rather not. Because until allocation you have to collect some points, for higher amounts it takes longer, and it also has to be repaid faster later.

We have already dealt with the topic of home savings contracts. However, a home savings contract for, e.g., over €300k would never be ready for allocation within 3 years. We were told that you should put at least €200-250/month per €100k into the home savings contract – so that would be €600-750 per month. And then the home savings contract (30% of the sum paid in) would only be ready for allocation in more than 10 years. Then there are also the high closing fees and the fact that you would have to repay the home loan fairly quickly later to get a certain interest rate. That in turn would increase the monthly installment. Certainly, this can still be incorporated into the financing, but for us, an additional €600-750 per month for the next 3 years on top of the rate for the land would probably be too high, since we are currently paying rent (including incidental costs) of €1,150/month – although thanks to index rent and high incidental costs that will probably rise soon. Or do you have a different approach on the topic of home savings?

Thank you very much for all the answers. I actually expected more headwind. I still wonder how we are supposed to get to a rate of 1,800 euros if we assume, for example, that we need a 500k loan (which I don't consider unrealistic). At 2% repayment and 3% interest, that’s already more than 2,000 euros per rate. Then there are the monthly ancillary costs. Or am I somehow wrong there?

I roughly calculated with 450k borrowed capital (500k total budget, 50k equity), then 1,800€ is just enough. A bit more would of course be better. You can also save a little in the time until construction or repay part of the land (definitely finance the land variably), that will also be counted as equity.

1. Still on the subject of return to the municipality: The wording in the draft contract is as follows:
"If the buyer does not fulfill the construction obligation according to § X of this contract, X is entitled to demand from him the debt-free transfer back of the property sold in § X against reimbursement of the amount paid to X according to § X, whereby all costs and taxes arising from the transfer back are to be borne by the buyer."

This means the real estate transfer tax and notary costs, right?

2. Otherwise, the property could alternatively be sold undeveloped to a third party, but only with the consent of the municipality. The clause reads as follows:
"The buyer further undertakes not to sell the purchase object to third parties before fulfilling the construction obligation, unless X grants its written consent. Consent is always given under the condition that the obligations are also imposed on the legal successor in identical content."

My question is: Would the ancillary costs also have to be borne for the new buyer? And would you only be allowed to sell the property at the price you paid for it? If neither were the case, the property purchase would be less risky for us if construction does not happen within three years. Then at least you would save real estate transfer tax + notary fees once and could add the interest paid onto the purchase price of the property. Although the municipality would still have a say regarding the sale.