October not exactly a rosy month for construction materials

Certainly, some progress is planned on the housing side (PTZ, simplification of standards, relaxation of the ZAN law, etc.) but professionals in the sector point to insufficient political voluntarism in the face of the urgency of the current crisis. Despite rather favorable factors (lower interest rates, more dynamic banking offer, disinflation, real estate demand, etc.), the construction sector remains weighed down by slow activity, leading in its wake to the decline of the materials market. At the end of August, the BPE showed a decline in volumes of around - 13% over one year, while aggregates, "aided" by a better-oriented economic situation in public works, limited the decline to - 6%. The gradual recovery in permits and construction starts, more noticeable in the second half of 2025, could give hope for a stabilization of volumes over the whole year.

Key figures

The decline in BPE deliveries could stop in 2025 (-1% to +1%) while aggregate production would stabilize or even increase slightly (0% to +2%).

The decline in volumes during the summer has stopped

According to the first estimates for August, the activity of ready-mixed concrete and aggregates would have increased again compared to the previous month. Thus, after an increase in June, then a quasi-stabilization in July, the volumes of aggregates extracted would have increased very slightly in August (+0,8% over one month, CVS-CJO data). However, they remain down -6% compared to August 2023. In fact, over the last three known months (June to August), activity increased by +2,1% compared to the previous three months, showing a decline of -4% compared to the same quarter a year ago. Cumulatively since January, volumes are down -5,9% over one year, a slightly more moderate rate than that observed with the cumulative over twelve months (-7%). On the BPE side, deliveries recorded a third consecutive month of increase in August (+3,8% after +0,5% in July and +4,7% in June, CVS-CJO data). Volumes are -7,3% lower than those of August 2023, a slower rate of decline compared to the cumulative total of the first eight months of the year (-13%). Over the three summer months (June to August), BPE production also recorded an increase compared to the previous three months (+2,4%) but remains down -10,4% over one year.

The UNICEM Materials indicator also describes the same movements. Month by month, the index rose by +1% in June and +2,3% in July (CVS-CJO data), reaching 84,1 (base 100 in 2021). Cumulatively since January, it fell by -9,4% over one year, which confirms the moderation of the downward pace (-11% in the first quarter). Tiles and bricks, cement as well as ready-mixed concrete and concrete products remain the most impacted materials in the "basket".

Building: a glimmer of hope?

The business climate slightly worsened in September according to construction company managers surveyed by INSEE. The indicator lost one point to return to its long-term average. In structural work, it was mainly the balance of opinion on past activity that deteriorated compared to August, while, on the side of planned activity, the balance remained stable. In this sector, the level of backlogs changed little (8,7 months) but the production apparatus is less in demand and tensions on supply are easing; "only" 35% of companies are unable to increase their production compared to almost 60% two years ago. It is true that construction activity remains very slow with a decline in housing starts of -5,3% from June to August, compared to the previous three months, with individual housing remaining more poorly oriented than collective housing (-10,6% and -2,2% respectively, CVS-CJO data). Cumulatively over twelve months to the end of August, housing starts totalled 269.700 units, or 20% less than the previous twelve months. On the premises side, the areas started fell by -11,3% in one year over the three months from June to August. With 21,062 million m2 started cumulatively over twelve months to the end of August, the decline reached -8% over one year, with the office segment being particularly poorly oriented. On the permit side, on the other hand, some encouraging signs are emerging. Regarding housing, authorisations increased by +4% over the last three months compared to the previous quarter, both in individual and collective housing (+3,4% and +4,3% respectively, CVS-CJO data). Over the last twelve months, 343.100 permits were recorded, bringing the decline to -9,5% over one year. In the non-residential sector, permits increased by +2,8% year-on-year over the last three months, driven by the public buildings and retail segment. In total over twelve months to the end of August, there were 37,279 million m2 authorized, a decline of -4,2% year-on-year. The annual trends in permits and construction starts therefore remain downward, but the rate of decline is gradually slowing. This is also what is observed on the housing sales market.

The latest data on diffuse individual properties, published by Markemétron, certainly show a very sluggish August; but, despite this fairly traditional summer drop, the decline in sales over a rolling quarter is now -9,8% compared to a rate close to -45% at the very beginning of the year. As the months go by, the hope of a market turnaround is therefore emerging. The real estate transaction indicators published by agencies (Se Loger.com) also confirm a certain revival in demand. After reaching a low point in August with 756.000 annual transactions in old properties (compared to 1,2 million two years ago), professionals saw them grow this summer by +7,2% over one year and are now counting on 900.000 sales in 2025. On the new property market, household demand is also tending to revive. This is evidenced by the production of new housing loans which, in the third quarter, increased by +53,2% over one year, in number of loans granted (compared to -33,6% just one year ago), leaving the cumulative figure over twelve months on an increase of +16% at the end of September on a year-on-year basis (-42,3% in September 2023). Of course, the game is not won and the real estate development market, despite promotional practices, remains at a low level. However, in a context of regular recovery in household purchasing intentions, the improvement in credit conditions, with the past drop in housing loan rates (-66 basis points since December 2023) and to come (another -125 basis points expected by the end of 2025 after the 25 bps drop in the ECB intervention rate in October) combined with a more proactive banking offer, could support household solvency and demand.

Outlook 2025

Added to this could be the positive effect of the recent political decisions of the Barnier government, with the expansion of the PTZ but also the relaxation of the ZAN law and the simplification of standards, favorable to a better orientation of the real estate offer.

In this context, and taking into account the transmission times between the real estate market situation and that of construction activity, the construction market would remain bearish in 2024 and for part of 2025 before recovering. The number of construction starts, whether in housing or non-residential, could thus stabilize, or even increase very slightly next year, which would allow the activity of the BPE to fluctuate between -1% and +1% after a year of marked contraction in its volumes in 2024 (-12%). The good orientation of the activity of public works in 2024, with robust orders driven by the electoral cycle and major projects in metropolitan areas, would make it possible to limit the decline in aggregate production to -5% this year, the low contribution of road works and earthworks weighing however on the needs of our materials. The approach of elections (in 2026) and budget cuts (Green Fund, AFIT-F) could accelerate the turnaround in the cycle during 2025 but, in the meantime, the aggregates activity (expected between 0 and +2% next year) could benefit from the increase in local investments and a less bad economic climate for BPE.

Illustrative image of the article via Depositphotos.com.