Building materials still in turmoil

In this highly fragmented parliamentary context, the political stakes of reducing public deficits divide elected officials, both on the arbitration of revenues and on those of expenditures... Meanwhile, emergencies are piling up on the social but also economic front and the sectors of the construction industry, which are going through an unprecedented crisis, are waiting for support measures to consolidate the conditions for a recovery. Lower rates, banking voluntarism, disinflation... constitute a favourable breeding ground but to date insufficient to stem the scale of the slump in new housing. If low points now seem to have been reached on the construction or development side, it is now appropriate to support the restart of the cycle with effective and ambitious measures that are up to the socio-economic challenges and the recession in the construction industry, for which the upstream and downstream sectors, starting with that of building materials, are now paying the price.

Key figures

In the third quarter, the activity of aggregates and ready-mix concrete finally stopped declining compared to the previous quarter: +2,9% and 1,5% respectively. (CVS-CJO data)

A month of September in sharp decline for BPE

After two months of slight recovery, BPE activity would have declined again in September, according to our initial estimates. Thus, compared to August, deliveries fell -6,1%, showing a decrease of -12,2% compared to last year (CVS-CJO data). However, in the third quarter, and for the first time in more than two years, the volumes produced stopped declining quarter by quarter, recording an increase of +1,5%, but still remaining 10,4% below the levels of a year ago. Cumulatively over the first nine months of the year, BPE deliveries are down -12,9%. Over twelve months, the volume produced fell below the threshold of 34 million m3, a historically low level, in line with the records recorded by housing starts. The improved economic outlook for the public works sector is providing slight support to the aggregates sector, which posted an increase of +4,1% between August and September and +3,1% compared to September 2023 (CVS-CJO data). In the third quarter, production recovered by +2,9% compared to the previous quarter but remained down -2,4% year-on-year. Cumulatively over the first nine months of the year, the aggregates sector fell by -5,1% year-on-year compared to -6,4% cumulatively over twelve rolling months. At the end of September, natural aggregates production barely reached 276 million tonnes, a level 20% lower than the average level of the last twenty years (341 Mt).

A sign that the low point may have been reached, our materials indicator recorded an increase for the third consecutive month (+0,9% in August, CVS-CJO data). Over the last three months, it has increased by +1,4% compared to the previous three months but has still lost -5,8% over one year. Cumulatively over eight months, the volume activity of the materials basket has fallen by another -7,2% over one year, a more moderate rate than the decline recorded over twelve rolling months (-9,7%). Tiles and bricks, cement and ready-mixed concrete remain, unsurprisingly, the materials in the basket most impacted by the residential construction crisis.

Building: landing without re-takeoff

According to INSEE, after ten consecutive quarters of decline, the general outlook for construction professionals improved in October, although remaining well below their long-term average. However, this development covers very different situations depending on the activity segment: in structural work, expected activity continues to deteriorate, particularly in new construction excluding housing, while, on the housing side, the outlook is a little less bad. Professionals' judgment on structural work order books is deteriorating significantly, even more than their level, which reached 8,5 months at the end of October (compared to 9 months a year ago). It should be noted that for the first time since March 2021, the balance of opinion on expected prices is moving downward, almost returning to its long-term average. It is true that the real estate situation, which precedes the construction situation, remains very poor despite signals of a turnaround in the cycle. As for sales of individual houses in the diffuse sector, Markemétron data for September confirm a "classic post-summer" recovery, but on a smaller scale than that observed on average over the long term (+72,5% compared to +100%). Over the last three months,

Sales achieved continue to decline, by -8% year-on-year, but this decline was -43,4% a year ago! In total, the current level of activity of CMists is 65% lower than that of the last twenty years, with the corollary of an increase in claims and a

contraction of production capacities. According to Altares, the number of bankruptcies in real estate development climbed by 85% over one year during the third quarter (i.e. 74 bankruptcies after 154 already recorded in the second quarter). The low point of sales by developers could be reached but activity remains lethargic. According to the latest figures published by the Federation of Real Estate Developers, net reservations of retail housing (12114 units) increased by +4,3% over one year in the third quarter of 2024 but remain down -12,7% cumulatively over the nine months (39.809). Among them, sales to individual investors gained +5% but, over nine months, they are down -19,8% (13.198 sales) and now represent only a third of total reservations (44% in 2022). Faced with demand that is only slowly recovering, the supply of developers continues to contract: fewer than 9.000 homes were offered for sale this quarter, or 41% less than a year ago (-33,7% cumulatively over nine months). In this context, housing construction continues to decline: in September, 1.890 homes were started, the lowest monthly level since 2000 (CVS-CJO data). Over the last three months, the number of homes started fell by -9,6% over one year, with the decline over twelve rolling months reaching -19,7% (with 264.000 homes). As for the number of authorized homes, it stopped falling between the second and third quarters (-0,3%) but is still at a level lower than that of the third quarter of 2023 (-7,6%). Over the last twelve months, 337.100 permits were issued, a level down -9,4% year-on-year. Overall, even if the end of 2024 is looming with less marked negative trends than at the beginning, the improvement remains slow and gradual and the recovery uncertain. The improvement in banking conditions, with the fall in interest rates (-80 bps for the new-build market since December 2023) and a more dynamic supply of loans, is still insufficient to boost household demand, as their real estate purchasing power is coming up against prices that are struggling to fall on the new-build market. The slowdown in inflation, the recovery in household confidence, and housing expectations and needs could support an end to the crisis, provided that the movement is supported by easing the constraints weighing on the residential market (construction standards, ZAN, etc.) and by providing financial assistance to first-time buyer and investor households (PTZ, incentives for rental investment, etc.).

TP: a less serene horizon

According to the FNTP, the business climate deteriorated in the third quarter of 2024, with the balance of opinion falling just below its long-term average. Professionals' opinions on past activity are rebounding, but they are more worried about the future. Lack of demand is becoming the primary obstacle to production (44% in October compared to 35% in July). Disrupted by heavy rainfall, work declined in September, slowing down the cumulative invoicing since January (+1,6% compared to +2,1% at the end of August in volume, CVS-CJO) but order books remain dynamic (+8,3%). As the municipal elections approach in 2026, the sector is concerned about a reversal of the electoral cycle precipitated by state budget cuts and other spending reduction measures that would "weigh down" local government investments.

Illustrative image of the article via Depositphotos.com.