Building a new home - will valuation meet/exceed building costs?

[Tom Seigold]

TL;DR: if I build a new house today, can I reasonably expect that it will sell for the same amount I spent (or more) in 4-5 years?

What I'm considering doing:

I'm considering building a small, ~2,000 sq. ft. house for myself, living in it for 4-5 years, and then selling it to upgrade into something much larger.  Since payments on the newly-constructed house would be below my means, I'd have enough extra income to acquire a few rental properties during those 4-5 years.  I'd also be keeping and renting out my current home during all of this.

The lot is a city-owned lot for $8k.  I'd aim to spend $200-300k on construction costs.

The main reason I'm interested in building, versus buying an existing $200-300k house, is that my city offers a decent grant: $25k toward my child's college tuition, as long as I stay in the house for at least four years.  It's the city's incentive for building new homes in neighborhoods that are starting to fall apart (the neighborhood itself is fine/safe).  A free $25k on a ~$250k construction seems like a good return, all other things equal, as I was otherwise planning to buy a house around the same price this year (I need a bit more space; 2,000 square feet is nearly double my current home).

Anyway, my concern is that I'll build the house, go to sell it in 4-5 years, and it'll be worth less than I spent to build it.  Or, at least, less than it should have appreciated to over those 4-5 years.  How likely is that to happen?