A "disappointing first quarter" for the building materials sector

Indeed, after many months of uncertainty, the adoption of the Finance Bill and the vote on a housing stimulus plan had laid a favorable groundwork for consolidating the recovery of the struggling residential sector. However, since March, the oil shock resulting from the blockade of the Strait of Hormuz and its repercussions on inflation, costs, and interest rates have hampered the potential for a rebound in household investment and undermined their confidence.

A climate that weakens growth (already at a standstill in the first quarter) but also public finances, with the cost of the war estimated at €6 billion to date.

In this context, materials activity slowed in the first quarter and while construction activity remained quite resilient in the building sector, public works activity deteriorated more than expected.

Not really any catch-up in March

After a poor February, partly due to excessive rainfall, March saw a recovery, although not a full rebound. Aggregate activity rose by nearly 5% compared to February but remained below the March 2025 level (-1,3%, seasonally adjusted data).

In the first quarter, production stabilized compared to the previous three months and was down 3% year-on-year. Over the last twelve months, aggregates activity has declined by 2,5%. As for ready-mix concrete, March deliveries also increased by 4% compared to February but remain 2,4% below their March 2025 level (seasonally adjusted data).

In the first quarter of 2026, ready-mix concrete production fell by 4,2% compared to the fourth quarter of 2025 and by 4,1% year-on-year. Overall, over the last twelve months, ready-mix concrete activity has declined by 2,8% year-on-year.

The materials indicator, still provisional for February (81,3), also reflects this downturn, falling by 1,3% compared to January and by 2,3% year-on-year (seasonally adjusted data). After a year and a fourth quarter down by approximately 1%, the indicator fell by 1,3% over the two-month period. Over the last three months for which figures are available (December to February), the volume of activity in the materials basket decreased by 1,5% compared to the previous quarter and by 0,6% year-on-year, a contraction shared by almost all the materials comprising the index.

Housing: construction up, sales down

When questioned in April by INSEE and the Bank of France, construction company leaders anticipated a decline in their activity after the slight rebound at the beginning of the year, particularly in structural work.

In a context of rising raw material costs linked to the conflict in the Middle East, the balance of opinion on projected prices in quotes is increasing sharply, and contractors are reporting difficulties in making short-term projections amid high levels of uncertainty, despite order books remaining stable. Indeed, the latest available indicators are a mixed bag.

On the one hand, the lethargy of the new-build market is confirmed, on the other, the ministry's figures reflect a marked rebound in construction at the start of this year. Thus, with 29.854 housing units started in March, 19,2% more than in February, housing starts in the first quarter of 2026 increased by 9,5% compared to the previous quarter, with the multi-family segment being more robust than the single-family segment (+17,7% versus +4,5%, seasonally adjusted data).

While still provisional, these figures reflect a significant increase in housing starts over the past year, with a rise of more than 35% for multi-family dwellings and 29% for single-family homes. However, the cumulative number of housing starts this year (279.832 at the end of March) remains well below the level of the last five years (-17,5%).

This constructive momentum should continue in the coming months, judging by the pace of permit applications, which, at the end of March, had almost returned to pre-crisis levels (early 2022). However, it is possible that this March rebound is linked to a pre-election effect…

Driven by the strength of the multi-family housing sector, building permits for authorized housing units rebounded by 33,1% between February and March. In the first quarter, they showed an increase of 17,2% compared to the previous quarter (including a 23,4% increase for multi-family housing) and a 27,8% increase year-on-year (including a 26,2% increase for multi-family housing). Cumulatively over twelve months, as of the end of March, the number of housing permits reached 395.427 units, 2% lower than the average of the past five years.

On the non-residential side, the trend in authorized areas is also upward in the first quarter (+4% year-on-year) but describes a decline of -1,7% cumulatively over twelve rolling months; as for areas started, although stable over the quarter (-0,3% year-on-year), they still increased by 6,5% year-on-year over the last twelve months.

The positive trend in the construction sector therefore contrasts with that of materials, which are struggling to get out of the rut, a gap that could be explained by longer implementation times, delays or other operational postponements.

In any case, the latest trends in the real estate market are hardly favorable. The quarterly survey conducted in April by INSEE among developers shows that their perception of demand for new housing has worsened compared to January.

Certainly, their prospects for construction starts are improving somewhat (while remaining below their long-term average) but they are more pessimistic about the evolution of their clients' financing methods and are increasingly seeing stocks of unsold housing higher than normal.

Moreover, according to data from the French Federation of Real Estate Developers (FPI) for the first quarter, new home sales fell by 14,3% year-on-year, and one in four projects was suspended or cancelled. As a result, developers' supply remains very limited and has contracted again (-21,1%).

However, despite a challenging environment, the initial effects of the Jeanbrun scheme appear to be emerging, with a 25% rebound in sales to investors in the first quarter. While their level remains low and far from targets, this initial sign is positive. Will this trend be confirmed in April, given the sharp decline in consumer confidence?

The INSEE indicator has indeed plunged by 5 points, the sharpest decline since the start of the war in Ukraine in March 2022. Households fear a deterioration in their personal financial situation, a rise in unemployment, and inflation. While their opinion on the advisability of saving remains stable, their willingness to make major purchases, particularly housing, has declined again.

Despite a rather anxious climate, the single-family home market held up well in March, with a more pronounced seasonal rebound in sales than is usually seen for this month. However, according to Markemétron, this momentum is slowing; thanks to the zero-interest loan (PTZ) and bank support for first-time buyers, the market is experiencing a soft landing, with annual sales growth exceeding 28% at the end of March (compared to a peak of 37% in October 2025).

For the moment, in fact, the rise in rates remains very moderate: in April, the rate of mortgage loans to individuals* stood at 3,23%. Since June 2025, which marked the end of the decline, it has increased by 11 basis points until December and then by 7 basis points in the first quarter of 2026… a modest increase, but one which has been accompanied by a clear slowdown in the production of loans on the new construction market: +6,6% quarterly year-on-year at the end of April, compared to +47,5% in April 2025.

Practical work: the climate is deteriorating

According to the FNTP, activity in the first quarter deteriorated more than expected. Work completed contracted by 6% compared to the previous quarter and by 6,3% year-on-year (in volume, seasonally adjusted).

Bad weather, the electoral context and tensions related to the war in Iran explain this downturn, which is also evident in orders, particularly public ones, which decreased by 17,2% year-on-year in the first quarter.

Uncertainty and rising costs are worrying businesses whose prospects are darkening: 53% of them are facing a lack of demand, a percentage not seen since October 2016!

Illustrative image of the article via Depositphotos.com.