Building a house in Germany - What you should consider

Find a plot of land to build on

First things first. If you want to build a house, the first thing you need to do is to find a suitable plot of land. Both free plots of land and plots with old properties should be considered. You will have to pay demolition costs for the existing house, but the land itself is often cheaper, so that the costs balance each other out. With the demolition costs, you have to consider that you cannot co-finance them. You will have to pay them from your savings. Especially if your savings are small, it is better to find a free plot of land. 

It would help if you didn't compromise with the plot of land. After all, it determines where you will live for the next few years. Once the house is built, it can no longer be moved. Therefore, you should check the plot thoroughly to see if it meets your requirements and if you are allowed to realize your desired building project at all. 

When building a house in Germany, you should pay attention to:

• the area (schools, supermarkets, future development)

• the infrastructure 

• access roads to your land

• the quality (e.g., slope)

• the development plan 

• the development of the land

Find the perfect plot of land to buy with our Hypofriend property search

Building your own house in Germany means saving on the purchase costs:

If you build a new house, the additional purchase costs are significantly lower than for an existing property or the purchase of a finished new build. When you build yourself, you pay property transfer tax, notary, and real estate agent only for the plot of land you buy from the seller, but not for your own building project or any construction costs. In this way, you reduce the additional purchase costs enormously. 

Example:

Let's say you buy a plot of land in Berlin for 250,000, and the building of the house costs an additional 400,000 euros. All in all, you spend 650,000 euros. The purchase costs, including real estate commission, can make up about 15 percent of the purchase price, but in your case, only of the land. That is 37,500 euros. If, on the other hand, you were to purchase the house already built, the purchase costs would have to be paid on the full 650,000 euros. This would result in total purchase fees of 97,500 euros. 

Check your mortgage options for your building project with our German mortgage calculator.

Closing costs for a property 

In addition to the purchase costs, you will also have to pay the construction costs to make the land usable. This includes the connection to the supply and disposal networks such as water supply, sewerage, gas, and electricity. Depending on how well-developed the area is, costs for road construction, sidewalks, street lighting, telephone, and cable TV networks may also be added. 

The development is important so that your house can later be supplied with electricity and water and the sewage can be drained off. However, there are also plots of land that are already partly or completely developed. You want to inform yourself about this before you buy, to calculate the costs. 

TIP: You can recognize plots of land requiring development by the abbreviation “ebp”. If the development is already concluded, the plots are marked as “ebf” — free of development fees.

The costs for the development of the property are very individual and can also vary greatly from municipality to municipality. Each has its own scale of fees.

Building permit

A building permit (Baugenehmigung)  is a certificate from the local building authority. With this permit, the building authority indicates that it has no reservations about the planned construction project in terms of legal regulations.

Duration of a house construction 

A house is not built overnight – even if prefabricated houses are built really quickly. The construction of a typical single-family home takes an average of 40 weeks – around ten months. Various factors can influence the construction time. These include the size and structure of the house, as well as weather conditions. Construction is often delayed rather than completed earlier than planned. Therefore, it is advisable to calculate with a good one-year construction time. 

When building a house, you have to keep in mind that you will have to pay costs already during the construction phase. You already pay interest on the disbursed loan, and in case of delay, you also pay commitment fees. However, you cannot yet live in the house and therefore have a double burden of rent and interest payments that you need to budget for.

Building options — different types of houses 

Once you have found your plot of land, you need to think about what kind of house you want to build. Should it be a single or two-family house? Would you rather imagine a bungalow without barriers or a multi-story house? Think not only about what you feel like, but also about how your needs might change in the future. Do you need more space in a few years because you are planning a family or your parents will also live in the house? Are your children already out of the house, and you would like to reduce the size of your house and find something suitable for your age? Try to think about as many variables as possible. 

Construction method

Once you have decided on the construction and the type of house, the question of the construction method remains. There are many types, all of which have advantages and disadvantages and depend heavily on your requirements and also your budget. 

 Here are some of the most popular methods:

 The solid house (Massivhaus) is built both inside and outside from solid materials such as concrete, sandstone brick, porous-, light- or reinforced concrete. It is built stone by stone on the property and is usually individually planned by an architect. It takes at least eight months to build a single-family home. This is also due to the material's long drying times. Solid houses are more expensive, but they are also very durable. 

 (Image: Büdenbender)

Prefabricated houses (Fertighaus) are based on a wooden frame or reinforced concrete construction. The individual parts of the house are manufactured in a factory, and later on, the plot of land is assembled.  The shell of the building is done in only two days. At least 93 days elapse from the order to the turnkey house. The fast construction process and manageable costs speak for a prefabricated house. However, there are limits to individuality, as they are standardized and mass-produced and are therefore cheaper than solid houses. Note that a basement often does not exist since no foundation is poured. The value stability of prefabricated houses is also lower than that of solid houses. 

A third type is wooden houses (Holzhäuser). They are made of local wood and need good thermal insulation. As with prefabricated houses, the prices for a wooden house are significantly lower than those for a solid house. The wooden components are prefabricated and assembled on the land. After six months, you can move into your new home. Disadvantages are the high insurance costs and the vulnerability to weather conditions. 

Consider construction subsidies 

If you are building a house, you should definitely consider the government subsidies. In addition to the Baukindergeld, the Kreditanstalt für Wiederaufbau (KfW) offers other subsidies, such as the subsidy for energy-efficient construction. Check elsewhere on our website or contact one of our mortgage advisors. 

Insurances for building owners 

Accidents and unforeseen problems can happen on a construction site. That is why you should protect yourself as a builder. There are special products for this purpose, such as the Bauherren-Haftpflichtversicherung, which covers damages to third parties due to your construction project. Specific accident insurance for construction workers is advisable if friends help you on the construction site. If something happens to them, the insurance will cover it. Furthermore, you must also consider insuring the building itself against any sort of damage. As this topic is quite vast, we will shortly cover it in an article of its own.

Is it worthwhile to have a surveyor? 

 A surveyor can make sense at two points. When buying the property, he looks at the condition of the land in advance. This prevents unpleasant surprises during construction. Once the construction is completed, you should also hire a reviewer. He will inspect the building and detect possible defects early on, which can otherwise become expensive to repair later. The costs for the expert are between a few hundred and a few thousand Euros — depending on what he is supposed to do. 

For whom building a house in Germany makes sense 

Building a house is for sure not the right option for everyone. It takes a lot of energy and time. Be mindful if you can invest the time needed. This is probably not compatible with a high-stress job. A cheap plot of land can often only be found in the countryside. Leaving the city should, in this case, be ok for you now and in the future. Furthermore, you are less flexible when owning a house. It's more difficult to rent out compared with a flat.

You should also consider if you are building a very marketable house. I.e., if you like an esoteric house that few people want or build a house that is in great demand, in the first case, be prepared to stay in the house for a long time or consider the money spent not fully like an investment.

In any case, if you are planning to move into your house, you should definitely consider building one. On the one hand, you will save a lot of money due to the reduced purchase costs. On the other hand, you can design the house according to your ideas. Depending on the type of construction, there are several ways to keep the cost of the property low. Thus, builders often get away cheaper than existing property buyers, and you need less savings.