The real estate crisis is taking hold in construction materials

In this context of market blockage, the inaction of public authorities and the recent withdrawal of the project to reform the HCSF criteria are worrying. We should therefore not expect new support measures for new housing nor a relaxation of credit granting criteria to revive construction. The issue here is not only budgetary! In reality, the trade-offs of public and monetary action seem to be oriented more towards the search for financial stability and debt reduction for households, a regulation which, for the moment, slows down their access to property. Indicators for new construction and materials confirm the extreme sluggishness of the market for this first quarter. Only public works shows better activity, but business optimism seems to be waning for the coming months.

Key figures

If the aggregates activity regained +1,4% compared to the previous quarter, that of BPE fell by -6%. (CVS-VJO data)

A little less “bad” for aggregates than BPE

After a slight rebound in the BPE and aggregates market between January and February, materials activity declined again in March. As for aggregates, production shows a decline of -4,8% compared to February and -6,6% year-on-year (CVS-CJO data). However, taking into account past developments, the trend for the first quarter of 2024 is positive compared to the fourth quarter of 2023 (+1,4%) but remains negative year-on-year (-5,3%). Cumulatively over the last twelve months, the aggregates activity is certainly still in sharp decline but at a slowing pace (-6,5% at the end of March compared to -8,2% in 2023). The trend is rather opposite when it comes to BPE where the rate of decline is increasing. In March, produced volumes fell by -5,7% compared to February and -14,4% year-on-year (CVS-CJO data). In the first quarter, deliveries fell -6% compared to the previous quarter but showed a fall of -14,3% compared to volumes a year ago. The effects of the real estate crisis and the contraction in construction starts on deliveries of ready-mixed concrete are therefore gaining momentum at the start of the year and the annual trend is expected to increase further over the coming months.

Provisional data from our materials indicator also suggests an accentuation of the decline in March. After a year of 2023 down by -9,4% (CJO data), the indicator lost -13,7% in the first quarter of 2024, with products mainly intended for construction recording more severe declines.

Supply and demand for housing still very constrained

Statistical data from the construction and housing market for the first quarter do not currently show any clear improvement. In the individual home market, the revival of activity traditionally observed after winter has taken place but it is starting from particularly low levels. According to Markemétron, even if demand is picking up a little, it remains strongly restrained by the restrictive policy of the Central Bank which limits access to credit. In the first quarter, sales fell further by -35,9% year-on-year and, given an economic situation that is still unfavorable for households in 2024, particularly with the rise in unemployment, the market for individual homes could still decline. contract by 15 to 20% this year to reach only 50.000 sales according to Markemétron. These concerns are also shared by promoters. The FPI (Federation of Real Estate Developers) recently highlighted that, despite a slight improvement in financing conditions and a recovery in block sales (+29,4% over one year, due to the CDC repurchase program Habitat and Action Logement), total sales of new housing fell further by -15,4% year-on-year in the first quarter of 2024. This represents 19.135 units, or a level 39% lower than the quarterly average of reservations over the last six years (31.137 units). At the same time, sales of ordinary housing fell significantly, by -41,2% compared to the first quarter of 2023 to 11.656 housing units, which constitutes a low point for 10 years, this level being less than half of the average of the last seven years (23.335 units). Promoters thus point to a double crisis, both linked to very weak demand but also to a supply which is becoming scarce. In this context, any revival of demand will very quickly come up against a shortage of products and therefore a rise in prices. In the first quarter, the slowdown in sales being more marked than that of sales, the housing stock fell by -4,2% year-on-year to 98.095 housing units. Among them, only 59% were “available”, i.e. under construction (54%) or completed (5%), the remaining 41% being at the project stage according to the FPI. Given the difficulties encountered by households in closing or simply obtaining bank financing, the lead times for the sale of goods offered by developers reached 22,2 months at the end of March, i.e. 7 and 1⁄2 months more than previously. is one year old. According to the INSEE household survey conducted in April, housing purchase intentions over 12 months are still not taking off. Economic and geopolitical concerns, coupled with a dual expectation of price and rate cuts, lead to a wait-and-see attitude which is freezing the market. This slump plunges real estate development (and the entire sector) into a major crisis, with insolvencies having increased by +71% between the fourth quarter of 2023 and the first quarter of 2024 (according to Altarès). Faced with this crisis, the public authorities seem to favor the path of monetary sobriety, which involves reducing household debt, and self-regulation of the market through prices. But, in reality, this political choice results for the moment in excluding the most vulnerable populations from accession to property (often young people, first-time buyers) while the prices of new real estate are struggling to fall due to a restricted supply and a structurally high level of project costs (access to land, inflation of standards and prices of materials). Meanwhile, and at the same time, the business climate measured by INSEE continues to darken among construction professionals. Their opinion on past activity and future activity continues to deteriorate in the new housing segment, as does their judgment on order books, with all three indicators below their long-term average. This echoes the decline in construction starts which continues: housing starts fell again by -4,9% between the fourth quarter of 2023 and the first quarter of 2024 (CVS-CJO data), leaving the slide over one year at -20 % and the cumulative figure over twelve months is around 283.000 units started.

Public works: optimism is moderating

According to the FNTP, public works activity increased in March compared to February and compared to March 2023 (respectively +1,6% and +1,9% in volume, CVS-CJO data). This increase makes it possible to stabilize activity in the first quarter at its level of last year, despite the sharp increase in non-working hours (+34,6% year-on-year in the first quarter) due to bad weather. in many regions (rainfall and flooding). Over twelve rolling months, billings increased by a further +4,1% at the end of March while order books, linked to the allocation of lots for major projects, showed an increase of +28,1% over the same period. However, when surveyed in April, professionals were a little less confident than in January about their future activity and their portfolios, particularly regarding public clients; a concern which is undoubtedly not unrelated to the prospects of greater budgetary austerity by the State, synonymous with cuts in credits and allocations to communities.

Illustrative image of the article via Depositphotos.com.