The building industry is entering recession: the FFB calls on the government to act

2023 assessment: entry into the crisis

The new housing crisis, which represents around 27% of activity, will prove particularly violent from 2023. With 286.000 construction starts expected over the year, the market will fall back close to its historic lows of 1992-1993 ( 275.000 units). This corresponds to a fall of 22% over the year, which is also accompanied by a collapse of 24% in the number of building permits. All territories, from metropolises to rural areas, and all types of housing, individual as well as collective, social as well as private, are entering into crisis. Production then drops by 8%.

The situation is barely less bad for new non-residential properties, which account for 19% of building turnover. Surface areas started and authorized fell by 14% and 4% respectively. Only the administrative buildings segment leaves some hope, especially since the position of 2024 in the municipal electoral cycle appears favorable. The fact remains that, taking into account the completion times and a still dynamic year 2022, production of new non-residential properties is barely changing (+0,4%).

As for improvement-maintenance, which accounts for 54% of activity, this is the only segment showing real growth, by almost 3% in volume, in particular thanks to energy renovation.

However, the new construction crisis prevails and the year 2023 ends with a drop of 0,6%. It brings employment in its wake, with around 3.000 positions lost in one year, including temporary full-time equivalent jobs (FTE).

The market downturn is also causing a, for the moment contained, increase in construction failures. Over the first eleven months of 2019 and compared to the same period of 2019, i.e. before the health crisis, they increased by 2%.

Forecast 2024: recession sets in

The deterioration of the general situation will continue in 2024, with in particular a slowdown in growth, to +0,4% in volume after +0,8% in 2023, and a rise in the unemployment rate, to 7,6% versus 7,3% a year earlier. The gradual decline in inflation would, however, allow a slight easing of the credit market, but too little and too late to influence the movement. In addition, it would be more than offset by the reduction in support measures for new housing, PTZ and “Pinel”.

In this context, taking into account the trends in sales and housing authorizations in 2023, construction starts will fall by another 16% in 2024, while permits will lose 12%. This will result in a drop in activity of 21% in volume.

As for new non-residential, the surface areas started will be down by 1,1%, reaching a historic low point. The authorized surface areas will increase by almost 2%, thanks to the good performance of administrative buildings, hotels and industrial buildings. However, activity will drop 6%, excluding the price effect.

For its part, improvement-maintenance will experience a slight decline, with growth in activity limited to 1,6%, due to a fairly gradual ramp-up of MaPrimeAdapt', the effects of the tertiary audit and the EduRénov' program and a MaPrimeRénov' system very oriented towards global renovation struggling to find its audience. Certainly, the objective is ambitious, with 1,6 billion euros in additional credits allocated to MaPrimeRénov'. But it risks not being achieved, with the conditional change of energy vector for heating in the case of the gesture approach and the intervention of a third party for large-scale renovations. It is not the 2.000 Mon Accompagnateur Rénov' approved next January for the entire territory that will make it possible to meet demand.

All of these developments will lead to a clear decline of 5,5% in building turnover in volume over 2024. The past overhang of employment over activity will then give way to a rapid fall of 90.000 jobs.

And if nothing changes, the FFB confirms that by 2025, building activity will decline by around 9% excluding price effects, or 14 billion euros less. This will result in a real increase in failures and a fall in employment, with 150.000 job losses, employees and FTE temporary workers combined, still over two years.

Furthermore, on the business side, another difficulty is emerging regarding Building REP. Here again, the objective is virtuous and indisputable, but its implementation appears Kafkaesque. Entrepreneurs and artisans find themselves stuck between eco-organizations and waste managers. Today, there are no real recovery solutions on construction sites or in businesses. In addition, the 2024 scales are still not known to date.

Crises and consequences

Beyond its impact on the production system, including employment, and on the strengthening of the housing difficulties of our fellow citizens, particularly the most modest, this crisis will affect French growth.

It is already doing this directly, while household investment expenditure is already the only aggregate to penalize GDP: between mid-2022 and the third quarter of 2023, it removes 0,4 point of percentage upwards of 1,1% of GDP. However, more than 80% of these expenses relate to investments in housing, in the form of new construction or major maintenance. In other words, the housing crisis cuts growth by almost a third over the period under review. And this will continue in 2024. The new construction crisis is therefore taking a macroeconomic turn.

There is also a public finance component. The fall in new construction and transactions in existing properties will seriously reduce the return on associated levies, particularly in the form of 20% VAT and transfer taxes for valuable consideration, the amount of which far exceeds that of investment aid. What's more, this will make it more difficult to finance public support for renovation, the cost of which clearly exceeds the return in the form of reduced rate VAT on the work.

There is still time to act

The FFB has already made a number of proposals to get out of the rut, particularly with regard to new construction.

Thus, to limit the economic and social damage in the profession, it is necessary to redeploy the PTZ to 40% throughout the territory and to revalue its scales, which date from 2016. This is a way to quickly relaunch the market, to respond to a very present demand, to allow the exit of the rental stock, but also to free up budgetary resources. In fact, taking into account the leverage effect on the one hand, and the VAT and local taxes weighing on the built property on the other hand, each new housing financed by PTZ brings €24.000 in net balance to the Nation on the database for the first half of 2023.

The FFB is also asking for a return to Pinel in 2022 while awaiting the establishment of the private landlord status, before the rental becomes completely ossified due to lack of supply to the park.

Furthermore, regarding MaPrimeRénov', the FFB would like to reopen the possibility of an approach by gesture(s) without changing the heating system and that duly qualified building companies can become Mon Accompagnateur Rénov'. It’s about the territorial coverage.

For Olivier Salleron, President of the French Building Federation (FFB), we no longer have time to procrastinate!

Illustrative image of the article via Depositphotos.com.