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Don't go mad building. You will need BPs for more important things than the small stat boosts that buildings give. Trade deals are mostly not worth it - large expense of BP to gain a few extra BP each week. Do the math. One or two of them might be worth it. Mostly not.
There is a free Shrine available given by Ezvanki Keeg, High Priest of Erastil, if you passed a Diplomacy check back when you were made Baron (if you spoke to him there). He will turn up in your Throne room soon if you did and you can then build a Shrine for free in your Capital.
Start with; Bulletin Board (Lawful) +2 to resolving Problem events in the region (this is HUGE; a good reason to play as a Lawful character), Stocks (any Evil) +1 to resolving Problems. Other must haves; Piers, (Walls?) and then, when possible Aviaries (needs to be built in a Town and allows you to conduct Kingdom affairs from all neighbouring regions even if you don't control the region you are in. It also shaves a day off how long events take). Also build Teleport Circles/Mage Towers - there seems to be a random bug in the game still regarding these so I can't offer any definitive details on how you get them (Divine III plus Arcane II are spoken of as reqs in various forums, possibly Arcane III, but even then some people can and some can't build them!).
UPDATE: Found one post that mentioned having Magister rank II is a requirement. I guess that would involve a Throne room event to improve your Magister's skills.
In order to upgrade to a Town you must have at least 6 buildings in your Capital/Village (not counting Pier, Wall or Lighthouse) and control 3 Regions (total).
To build a 2nd Town you need 6 Regions (total) and 6 buildings in the Village you want to upgrade (not counting Pier, Wall or Lighthouse).
For a City, 9 Regions with 3 Towns (one being your Capital) and your Capital needs 16 buildings (not counting the 3 mentioned). If you get Varnhold it comes as a ready made Town so you can time your other settlement upgrades around when you get it and then upgrade your Capital to a City straight afterwards.
By all means build useful Kingdom Stat boosting buildings when you have spare BP but, always keep a healthy reserve of BP (minimum of 100, later on, more). Going into negative (there are events which auto deduct BP) is REALLY bad for your Kingdom. Buy to get back into positive immediately if that happens.
Economy boosting buildings are good. Artisan Workshops are a must - when you meet them & recruit them. Make use of additional stat boosts from the adjacency bonuses.
Your settlements get more building spaces when they upgrade to Town (20) and then City (40). You can demolish existing buildings and then rebuild them for free (you get half the BP back when demolishing but the rebuild cost is half = no cost) although it will still take the usual amount of time to rebuild them. You should be able to reposition buildings to make best use of adjacency bonuses in this way. Some upgrades take up more space (which means they now front a larger number of adjacent spots).
Bear in mind that there are several (4 iirc) different settlement layouts. Your later settlements will not have the same block set up as your Capital. When placing new Villages it is probably a good idea to Save beforehand and reload to try alternative locations to find the one you like best. All of them should be on a River however, for the Pier (good for Economy - very important).
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Don't go mad building. You will need BPs for more important things than the small stat boosts that buildings give. Trade deals are mostly not worth it - large expense of BP to gain a few extra BP each week. Do the math. One or two of them might be worth it. Mostly not.
There is a free Shrine available given by Ezvanki Keeg, High Priest of Erastil, if you passed a Diplomacy check back when you were made Baron (if you spoke to him there). He will turn up in your Throne room soon if you did and you can then build a Shrine for free in your Capital.
Start with; Bulletin Board (Lawful) +2 to resolving Problem events in the region (this is HUGE; a good reason to play as a Lawful character), Stocks (any Evil) +1 to resolving Problems. Other must haves; Piers, (Walls?) and then, when possible Aviaries (needs to be built in a Town and allows you to conduct Kingdom affairs from all neighbouring regions even if you don't control the region you are in. It also shaves a day off how long events take). Also build Teleport Circles/Mage Towers - there seems to be a random bug in the game still regarding these so I can't offer any definitive details on how you get them (Divine III plus Arcane II are spoken of as reqs in various forums, possibly Arcane III, but even then some people can and some can't build them!).
UPDATE: Found one post that mentioned having Magister rank II is a requirement. I guess that would involve a Throne room event to improve your Magister's skills.
In order to upgrade to a Town you must have at least 6 buildings in your Capital/Village (not counting Pier, Wall or Lighthouse) and control 3 Regions (total).
To build a 2nd Town you need 6 Regions (total) and 6 buildings in the Village you want to upgrade (not counting Pier, Wall or Lighthouse).
For a City, 9 Regions with 3 Towns (one being your Capital) and your Capital needs 16 buildings (not counting the 3 mentioned). If you get Varnhold it comes as a ready made Town so you can time your other settlement upgrades around when you get it and then upgrade your Capital to a City straight afterwards.
By all means build useful Kingdom Stat boosting buildings when you have spare BP but, always keep a healthy reserve of BP (minimum of 100, later on, more). Going into negative (there are events which auto deduct BP) is REALLY bad for your Kingdom. Buy to get back into positive immediately if that happens.
Economy boosting buildings are good. Artisan Workshops are a must - when you meet them & recruit them. Make use of additional stat boosts from the adjacency bonuses.
Your settlements get more building spaces when they upgrade to Town (20) and then City (40). You can demolish existing buildings and then rebuild them for free (you get half the BP back when demolishing but the rebuild cost is half = no cost) although it will still take the usual amount of time to rebuild them. You should be able to reposition buildings to make best use of adjacency bonuses in this way. Some upgrades take up more space (which means they now front a larger number of adjacent spots).
Bear in mind that there are several (4 iirc) different settlement layouts. Your later settlements will not have the same block set up as your Capital. When placing new Villages it is probably a good idea to Save beforehand and reload to try alternative locations to find the one you like best. All of them should be on a River however, for the Pier (good for Economy - very important).