Construction materials: activity hampered by the housing crisis, energy shortages and economic uncertainties

After three and a half months of war in the Middle East and some forty "imminent deals" announced by Donald Trump, a peace agreement, endorsed by Iran, was finally signed with the United States. Following its announcement in mid-June, the price of Brent crude fell back below €80 a barrel after peaking at €120 at the end of April.

The reopening of the Strait of Hormuz and the gradual normalization of the situation should help to ease inflationary pressures and the downward pressure on interest rates. However, for the construction sector, the first half of the year has been marked by a series of unfavorable factors.

Bad weather, geopolitical tensions, rising oil prices, rising interest rates and the municipal election cycle have weighed on the momentum of the exit from the real estate crisis that began in 2025. In this context, the construction materials sector is struggling to regain momentum and remains down at the end of April.

Will a favorable outcome to the Iranian conflict allow, in the coming months, for a reduction in wait-and-see attitude, a revival of confidence, and the restoration of the financial conditions necessary for the solvency of projects? The question remains open.

A lackluster April for materials

While 2026 was shaping up to be a better year, materials activity ultimately slowed down during the first four months of the year, due to the combined effect of the bad weather in January-February and then the Iranian conflict.

After a modest rebound in March, aggregate production is estimated to have fallen by 3,4% in April compared to March, according to initial estimates, barely managing to stabilize year-on-year (-0,3%, seasonally adjusted data).

Over the last three months for which figures are available, activity fell by 2,7% compared to the previous three months and by 3,1% year-on-year. Cumulatively, over the first four months of 2026, production declined by 2,4% year-on-year, a slightly higher rate than the cumulative twelve-month decline (-2,2%).

Regarding ready-mix concrete, despite an increase in March and April (+0,9% compared to March, seasonally adjusted data), volumes are not rising significantly compared to a year ago (-0,3%). Deliveries remain down 4,2% for February-March-April compared to the previous three months, and 3,7% compared to the same period last year.

The downward trend over the four months is thus more pronounced than that observed over the cumulative total of the last twelve months (-3,1% against -2,3%), confirming the downturn at the beginning of the year.

The materials indicator, still provisional for March, strengthened by 3,6% after two declines in January and February. At 84,2, it is up 1,4% year-on-year. However, activity in the materials basket shows a 2,3% decline in the first quarter of 2026 compared to the fourth quarter of 2025, and is only tending to stabilize year-on-year (-0,3%).

The activity in the mineral materials sector is therefore still stagnating. On a rolling twelve-month basis, the trend remains downward, at -0,6%, the same rate as that observed a year earlier.

Housing: a still fragile recovery

In the construction sector, the positive momentum that began in 2025 has stalled. The latest survey conducted by INSEE in May does show a slight improvement in the business climate, but this is mainly due to the finishing trades.

In the construction sector, however, the balance of opinion on past and future activity as well as order books are deteriorating rather, a finding also shared by the Bank of France survey.

However, despite remaining low, new construction continues its recovery. The latest figures from the Ministry at the end of April show that the number of housing starts has increased by more than 37% cumulatively since January compared to the first four months of 2025. At 290.841 units, the number of housing starts over the past year remains, however, 15% below the average of the last five years.

On the non-residential side, the areas started are also up, but more modestly. Starting from a very low base, they show +3% year-on-year during the first four months of the year, including +8% over the three months from February to April and +7,6% cumulatively over twelve months, for a total of 21,185 million m².

These developments contrast with those of materials production, which are still struggling to take off. Beyond contrasting territorial dynamics, this gap may reflect longer latency periods between the start of construction projects, operational implementation, and order commitments.

In a disturbed and uncertain context, where a wait-and-see attitude remains strong, the spread of the recovery to the materials sector therefore seems to be delayed.

Permits, property development, and detached houses: contrasting signals

The spread of the energy shock following the Iranian conflict could ultimately weigh on the strength of permits and the opening of construction projects.

Currently, the number of housing permits continues to rise, increasing by 12% year-on-year during the first four months of the year, a pace driven primarily by single-family homes (+22%). The cumulative number of permits over the past year, reaching 384.539 units at the end of April, represents a 16% year-on-year increase but remains approximately 6% below the average level of the previous five years.

For premises, the authorized surface areas have decreased by 4,1% cumulatively over twelve months to the end of April, despite a 2% year-on-year increase over the last three months.

Upstream, the latest trends in the real estate development and single-family home market suggest a possible slowdown in construction activity.

Among developers, despite a 4% increase in new housing transactions between the fourth quarter of 2025 and the first quarter of 2026, their level is stagnating compared to the first quarter of 2025. On a rolling annual basis, the market is down by almost 6%, with 65.294 reservations over the year.

The decline in sales to individuals mainly concerns first-time buyers, while demand from social housing providers is also experiencing a sharp contraction.

Among individual home builders, the slowdown in sales of individual homes is confirmed. According to the Markemétron bulletin for April, international turbulence has precipitated the market's downturn, which is now only growing by 5,6% year-on-year in the first four months of the year, compared to +33% a year ago.

Even though sales over the last twelve months still gained 23% at the end of April, professionals anticipate a continued slowdown, with transactions reaching at best 72.000 units in 2026, compared to 68.000 in 2025.

New construction lending remains active, but creditworthiness is becoming strained.

New home loan production, measured quarterly, fell by 6% year-on-year in May, and by 2,5% in terms of the number of loans. A year ago, it had increased by 40,5% and 54,6% respectively.

However, the new-build loan market remains active. Over the past twelve months, it shows an increase of 12,6% in production and 16,1% in the number of loans.

The reduced solvency of demand, however, explains the observed shifts. The rise in inflation, to 2,4% in May, linked to the shock on fuel prices, eroded household purchasing power in a context where new housing prices remain high and the cost of credit has increased.

Although interest rate increases began before the Iranian crisis, they remained moderate, as banks chose to absorb part of the shock through increased margins. In May, the average mortgage rate stood at 3,25%, according to the Crédit Logement Observatory, 20 basis points higher than the low point projected for June 2025.

The one-off increase in key interest rates by the ECB, of 25 basis points in June, could however lead banks to moderate their commercial efforts.

Public works: a succession of negative factors

In the public works sector, the situation also remains deteriorated. According to the latest survey by the FNTP, activity declined again in April, falling by 4,8% over one month and 11,5% year-on-year in volume.

This decline reflects the contraction in orders, which are 15% below those of a year ago, with a drop of nearly 18% in the first four months of 2026.

Adding to the negative impact of the municipal elections is the rise in production costs linked to the Iranian crisis. The TP01 index thus increased by 3,1% between February and March, in a context where budgetary flexibility remains very limited.

A recovery still contingent on confidence and financial conditions

The coming months will therefore be crucial for the entire materials sector. A drop in oil prices and a relaxation of geopolitical tensions could help alleviate some of the pressure on costs and interest rates.

But the recovery will depend primarily on the market's ability to convert permits and construction starts into actual orders for materials. As long as the wait-and-see attitude of households, developers, local authorities, and project owners remains high, the exit from the crisis will remain fragile.

For construction materials manufacturers, the challenge now is whether the real estate recovery that began in 2025 can actually spread to the production of aggregates, ready-mix concrete, mineral materials and, more broadly, to the entire construction chain.

Illustrative image of the article via Depositphotos.com.