The real estate industry sticks out its tongue. New construction fell to abnormally low levels at the end of 2022. Published on Friday February 17 by the Ministry for Ecological Transition, the statistics of the marketing of new housing, worry developers. “I didn’t expect it, I thought there would be a rebound in the last quarter of 2022, because that’s what happens when a PINEL tax law comes to an end. There is often a runaway, for fear that the next one will be less advantageous”, explains to L’Express Norbert Fanchon, president of the management board of the real estate development group Gambetta.
However, reservations by individuals with promoters continued to decline during the year. Supporting figures: in the last quarter, with 22,500 reservations, they were barely above their level during the confinement of spring 2020. In total, individuals reserved some 110,000 homes in 2022, i.e. 15% less only in 2021.
To view the graph, click here.
The reservation contract is also called a preliminary contract and makes it possible to secure a purchase in exchange for a security deposit. While committing the promoter, it does not therefore constitute a contract of sale. In total, “77.8% of housing reservations within the framework of block sales are located in large urban areas (39.4% in zones A or A bis, which bring together Paris, a large part of the Ile- de-France, the Côte d’Azur and the border area with Switzerland)”, underline our colleagues fromImmo Morning. In French Geneva, reservations are down 21% compared to last year, according to the Federation of Real Estate Developers (FPI).
Same observation on the side of sales over the year. Their number fell in 2022, by 6%, to around 110,000. collapsing by 31.3% over one year. A deterioration never observed before, even during the subprime crisis of 2008-2009,” said the Pôle Habitat of the French Building Federation to L’Express. The organization represents developers, home builders and planners. The construction of houses in the scattered sector fell below the 100,000 gross sales mark in 2022, with only 96,000 units, against 121,000 in 2021. The collapse in sales was observed in all regions, without exception. Over the 2022 financial year, eleven of them recorded a fall of more than 25% year-on-year.
To view the graph, click here.
“We saw our construction costs soar”
“In July-August, we saw that the figures for new real estate were a little worse, then a sharp drop in September. Since the beginning of December, it’s been a disaster”, laments Pascal Boulanger, president of the Federation. real estate developers (REITs). According to the professional, however, it is not for lack of having alerted the top of the State. “Since March 2020, there was a supply crisis, there were not enough building permits granted by the newly elected mayors.” Why hold them responsible for the lack of housing construction? “Some mayors, who are a bit too extremist, no longer build […] We must motivate the mayors builders”, supported Olivier Salleron, president of the French Building Federation (FFB) in mid-November on the set of BFMTV. Note that the number of building permits had increased in the third quarter of 2022 by 25%.
“Today, the problem is no longer supply, but demand. We had building permits, now we have to implement them. Added to this is the increase in costs and works, so we have no room for maneuver on operations”, resumes Norbert Fanchon. Commodity prices have soared in the wake of the war in Ukraine. “We have seen our construction costs soar. Now, there is no longer any promoter who triggers an operation before having validated the construction cost. We no longer know where we are setting foot”, adds Pascal Boulanger . According to INSEE, the second quarter of 2022 recorded an increase in construction costs of 8%. “THE price indices have risen sharply for several building materials, as have the prices of certain metals”, reveals the CAPEB, employers’ union for building crafts, in its economic report published in October. Are concerned: zinc, iron, steel, aluminum, but also tiles or bricks.
Buyers must therefore juggle between high marketing prices and dwindling purchasing power. In other words, promoters must therefore sell at a higher price to keep their operations profitable… but individuals cannot follow.” Today, we make perfect things that no one can afford to buy anymore. The best is the enemy of good”, continues Pascal Boulanger. Due to inflation, the real estate purchasing power of the French has fallen by 20 square meters in three years, according to a study by Bestrates.com unveiled by The Parisian in January. Either one or even two parts less. Low-income households also have more difficulty borrowing. The rapid rise in interest rates, combined with regulations on usury rates, which prohibit banks from lending beyond a certain rate, have prevented buyers from obtaining their credit. “Fortunately, the government has understood and the wear rate is now calculated monthly and not quarterly,” says Pascal Boulanger.
An “emotional” explanation
However, Norbert Fanchon does not subscribe to this theory, believing that there have never been so many savings in France. For him, the “rise in rates” is compensated by “the use of this savings”. According to him, the only explanation for the drop in demand is “emotional”, that is to say “anxiety linked to purchasing power and the war at the gates of Europe”. The leader of the Gambetta group points to a lack of confidence on the part of individuals. In the last trimester, booking cancellations accounted for more than 20% of the total, according to ministry figures. Pascal Boulanger details: “We have 25% fewer gross reservations. The withdrawal rate, someone who signs a reservation contract but does not go through with it, has gone from 13% to 27%. And since the December 1, we have withdrawal rates close to 50%.
Regarding block sales, that is to say sales of entire buildings, the situation is no better, with a 20% drop in reservations in 2022. Mainly due to social landlords. The rise in interest rates has indeed inflated their debt, and energy renovation sites are already monopolizing a good part of their investments. What to expect for the year 2023? “It can’t be good. Even if demand picks up again tomorrow, we won’t have enough supply. It takes a year and a half to get the machine back up and running.” The number of new homes under construction should fall by 9% in 2023, according to the French Building Federation (FFB) In the meantime, it is the image of a France of happy owners who risk crumbling.