The French Building Federation presents four measures to the new government to get the sector out of recession

Building activity: the decline continues

The crisis in new housing is not abating. Year-on-year over seven months to the end of July, construction starts fell by another 13,4%, which confirms a 2024 trend of around 260.000 homes, a level close to that of the end of the 1950s. In fact, permits, which fell by another 9,9% over the same period, do not give hope for an imminent rebound. Of course, the low point is probably approaching for sales of single-family homes, which were the first to enter the crisis, but the same is not true for real estate development on the one hand, and it will take time for any upstream improvement to translate into activity for the construction industry on the other.

The landing is clearer in new non-residential construction, while it is at its lowest historical level with a trend of just over 21 million m2 started in 2024. In fact, the areas started and authorized are "only" falling by 6,9% and 2,0% over the first seven months of 2024 compared to the same period in 2023. Importantly, the effect of the 2026 municipal elections is finally clearly visible in the 11,7% increase in the areas started for administrative buildings year-on-year over three months to the end of July. However, there is also a near-stabilization of volumes for industrial and commercial premises over the same period.

As for the improvement-maintenance activity, it continues to grow but less and less quickly. Between the second quarters of 2023 and 2024, it shows a modest increase of 1,1% excluding the price effect, still penalized by the failed reform of MaPrimeRénov' at the very beginning of 2024. Despite the welcome relaxation of this system last May, energy renovation only progressed by 0,4%. In addition, feedback from the field does not give much hope of an acceleration by the end of the year.

Overall, building production fell by 4,3% in volume year-on-year in the first half of 2024 and the FFB confirmed its forecast of -5,5% for the year.

Gold medal companies for resilience

While a surge in bankruptcies was predicted in this activity crisis situation, it is clear that there is, for the time being, some resistance. The end of 2023 saw rapid growth in the construction sector, by 45% precisely year-on-year over the last four months of the year, but before a stabilisation, or even a slight decline since then, since the trend in bankruptcies over the first eight months of 2024 corresponds to an increase of 30%. The fact remains that cash flow pressures are increasing and the number of fragile companies is increasing proportionally.

Employment follows the same trend as bankruptcies. Employees and temporary workers in full-time equivalent jobs (FTE) combined, the construction industry lost around 28.000 jobs between the first half of 2023 and 2024. Given the collapse in productivity and based on feedback from the field, the FFB fears an acceleration in the second half of the year. It would lead to estimating the decline in employment at between 40.000 and 50.000 over the whole year and at 60.000 between the end of 2023 and the end of 2024.

Playing the cycle is not enough

Despite the absence of a government for more than two months, three very positive factors deserve to be noted. Firstly, there is the clear decline in inflation, including on materials used in construction. And this is reflected, a second welcome factor, by a confirmed drop in property interest rates, which gives hope of a drop below the 3% mark by 2025. The third positive factor arises from the improvement in household morale and, in particular, from their ability and desire to plan ahead, particularly through a property project.

But waiting for these factors to play out enough to straighten out the cycle on their own would be a dangerous bet. In fact, despite the drop in rates, the ability to undertake operations remains penalized by a lack of personal contribution or equity among many players. In addition, construction is a long-term industry and what is not undertaken today will be lacking for several quarters. Clearly, without a helping hand, 2025 will once again be remembered as a year of crisis in the sector, with its procession of job losses and social and macroeconomic impacts.

It is therefore important that the new government retains, in the Finance Bill for 2025, rapid impact measures for the construction markets, as long as the sector can respond. Those that the FFB supports are known. The four main ones can be summed up as:

• a reestablishment of a universal zero-rate loan (PTZ), or a reduced-rate loan on the same principle, with long repayment deferrals;
• an extension of the “Pinel” scheme, due to the lack of sufficient time to develop and implement another system and while the Court of Auditors recognizes many virtues of the “Pinel” scheme;
• maintaining aid for energy renovation in 2025, particularly MaPrimeRénov' under its current conditions;
• a halt to regulatory overbidding, including a shift in the upcoming stages of RE2020.

These four measures can easily form the framework of a housing plan, the necessity of which everyone recognises, even at the European level since we are awaiting the imminent appointment of a Housing Commissioner, a first!

In making these requests, the FFB is not unaware of the budgetary situation of our country. However, it remembers that a well-oriented real estate activity also means good tax revenues for the Nation.