The fall in home loan rates is confirmed in a political context full of uncertainties

This announcement suggests a continuation of the downward movement in home loan rates in the second half of 2024, with another reduction in the “refi” rate being expected by the end of 2024. This is an essential condition for the exit process from construction crisis but it is not the only one. The proactiveness of banks in terms of credit, the decline in property prices, the restoration of solvency and confidence are also necessary to revive household investment in housing. The road remains long. In addition, the latest political turbulence following the European elections will generate uncertainties and legislative uncertainty, the impacts of which on the sector are currently difficult to assess. For the moment, the upstream sector is experiencing the fall in construction activity: the UNICEM Materials indicator plunges by -11,4% in volume over one year in the first quarter of 2024 after a decline of -5,9% per year. compared to the previous quarter (CVS-CJO).

Key figures

Cumulative 4 months 2024/2023:

• BPE shows a contraction of – 13,5% compared to – 5% for aggregates.

April less bad than March

Since January, activity has drawn a sawtooth profile, with increases and decreases alternating over the months. Thus, after the sharp decline in March, aggregate volumes increased by +1,5% in April but remained down -5,3% year-on-year (CVS-CJO data). Over the last three months, however, activity recorded an increase of +1,1% compared to the previous three months, leaving the decline at -5,6% year-on-year. At the end of April and cumulatively since January, aggregate production was down -5,9% over one year while it showed a contraction of -6,8% over twelve rolling months. On the BPE side, after having fallen significantly in March, deliveries increased by +2,6% in April, while remaining 11,1% lower than those of a year ago. Over the February-April quarter, BPE production fell further -3,4% compared to the previous three months and -12,4% compared to the same period last year. At the end of April, cumulatively since January, deliveries lost -13,5% over one year and contracted by -7,2% over twelve rolling months.

The new UNICEM materials activity indicator, calculated in volume from the INSEE turnover and production price indices, also shows us a very negative trend at the start of the year. After a drop of -9,7% in 2023, it fell by -5,9% in the first quarter compared to the previous quarter and by -11,4% over one year. In March, the overall basket index showed 82,1 (base 100 in January 2021), a decrease of -4% compared to February and -9,9% year-on-year (CVS-CJO). Of all the materials that make up the indicator, tiles and bricks, BPE and concrete products show the largest declines (respectively -20,1%, -16,4% and -13,2% cumulatively over twelve month to the end of March).

Housing starts at lowest level since 2000

According to the latest survey conducted in May by INSEE among professionals in the construction industry, the business climate is stabilizing and remaining just above its long-term average. But in the structural works, the balance of opinion on the planned activity is well below its average of the last 10 years (at -9 against +1). Likewise, the judgment on the order books for structural work is well below the ten-year average while the level of these books is close to it (at 8,7 months compared to 8,4 over ten years). This gap undoubtedly reflects a sharp contraction in new order intake while some in progress are struggling or taking a long time to be completed, with business leaders still, for 66,7% of them, faced with recruitment difficulties. . On the construction side, the situation remains deteriorated even if certain signals suggest that the low point seems to have been reached. Over the last twelve months, at the end of April, housing starts fell again by -22,3% to 282.400 units, the lowest level ever observed since 2000. The rate of decline has nevertheless moderated over the last three months. (-10,2% over one year) and construction site openings even increased between March and April (+9%) and compared to the previous three months (+2,5%, CVS-CJO data), notably thanks to collective segment (+7,4%). On the non-residential side, premises started fell further by -11,7% over twelve months to the end of April and -8,2% over the last three months. But permits are recovering and increasing by +1,5% year-on-year in the February-April quarter. Over twelve months, they remain 5,6% lower than the level of the previous twelve months. This recovery in authorizations also seems to be taking shape timidly on the housing side.

In April, permits increased by +4% compared to March but, over three months, the trend remains negative compared to the previous three months (-4,9%, CVS-CJO data). In total, at the end of April and cumulatively over twelve months, there were 358.200 housing permits, or 17,7% less than twelve months earlier. These first signs of improvement are also found among individual house builders (CMists). According to Markemétron, sales for April and the beginning of the year are encouraging and confirm that the inflection point has been reached. However, this new transaction regime is at a very low level compared to the past, around 32% below that of a year ago for this quarter. In view of these developments, Markemétron is counting on 48.000 sales in 2024, which would leave the market still down 20% compared to 2023. It is true that the real estate market remains weighed down at the start of 2024: transactions in the old (835.000 at the end of February) lost 23% over one year; credit rates and property prices, despite a slight decline, are still too high to allow young, first-time buyer households to buy and discourage owners from moving. “Comfort” sales, which ensure market fluidity and breadth, are giving way only to “necessity” sales (family events). As for the new property market, which is very dependent on old properties, transactions are at their lowest since 1995, having been reduced by a third in three years. The credit tap has however been reopened a little by the banks at the start of 2024 but demand, although better oriented, remains weak. The flow of new credits has in fact recovered since January (+74% between December 2023 and May 2024) but the trend nonetheless remains very negative: at the end of May, over twelve months, credit production still showed - 34% and the number of loans granted, -25%. However, the housing needs are there! In recent years, demand for social housing has increased significantly (+7,5% in 2023 according to an HCDL* report) with a stock of 2,6 million pending applications, the highest level since 2005. In At the same time, the USH* underlines that the supply of social housing has never been so low: in 2023, there would be 82.000 compared to an average rather close to 110.000 over a long period. As for housing in the free sector, a recent study carried out by ESPI* estimated additional needs at 400.000 units per year by 2030... a projection which can be explained by the "loosening" of households (2,11 people per housing in 2030 compared to 2,22 to date), more impactful than the decline in the birth rate but also by the ecological transition and population movements.

Public works: good start to the year

In April, according to the FNTP, billings continued to increase (+2,5% year-on-year), leaving the four-month period with an increase of +1,4% in volume year-on-year. The robustness of order books (+32,3% year-on-year in volume), fueled by major projects (notably the awarding of line 15-East in April) and by the electoral cycle, allows for a certain optimism for months to come even if a slowdown cannot be ruled out in the context of the holding of the Olympic Games and the reduction of credit lines for communities provided for by the Macron government's stability program. But the looming political reshuffle could well reshuffle the cards, including those of budgetary rigor...

*HCDL: High Committee for the Right to Housing – USH: Social Union for Housing – ESPI: Higher School of Real Estate Professions

Illustrative image of the article via Depositphotos.com.