Real estate is a sector in crisis that has been raising alarms for years. The European Central Bank (ECB) lowered its key rates on Thursday, September 12, for the second time in three months, which should ease credit conditions for households and businesses. The ECB lowered its main key rate by 0.25 points, in the face of falling inflation, but without committing to further monetary easing. The rate on deposits, which is the benchmark, was raised to 3.50%.
franceinfo: For you, is this a breath of fresh air?
Pascal Boulanger, president of the Federation of Real Estate Developers (FPI) : Yes, it is definitely a breath of fresh air. They have just dropped by 0.25 and we know that one point makes 10% of the clientele solvent. So, we can estimate that we will have made 2.5% of the clientele solvent. It is not huge, but it is going in the right direction.
If it’s easier and cheaper for banks to borrow, it will potentially be easier for individual or professional buyers too. Do you expect there to be at least a psychological effect, beyond a drop in the cost of borrowing, that it will re-energize your market?
It’s going in the right direction. From there to revitalizing the market, no, I don’t think so. It will improve it. In this deep, violent crisis that we are experiencing, it is good news. It will not change everything.
The new construction sector is doing badly today, worse and worse?
Listen, I am the bird of ill omen. Every quarter, I announce that we have hit rock bottom and every quarter, we are even worse than the previous quarter or the quarter n-1. We are now about halfway, both in sales and reservations, of a normal year. So we are at -50 and we continue to fall. We will end the year, maybe at -60, -65, we will see. So it is going very badly, of course. How do you want to make a business model when you are at 35 or 40% of your objective?
There is no demand, there is no supply either. Is everything blocked?
Everything is blocked. At the beginning, we had a supply problem. Mayors no longer liked to give building permits. Mayors who were builders were no longer in fashion. And since the rise in interest rates, we no longer have any demand, we have a demand that has not been solvent. So since we do not have much demand, we no longer put anything into the supply and the crisis fuels the crisis. That is the real problem, is that today, I have a demand problem. The day that demand comes back, and it will come back, I think, the very day, I would say, I have a supply problem because since we no longer put anything into the supply, when there is demand, we will not have enough supply. It is quite Kafkaesque by the way.
Because sometimes there are projects that are authorized by elected officials, but which still do not come to fruition?
Yes, of course, I put a new statistic into circuit in our statistics. I held my press conference a week ago where we have 23% of housing withdrawals due to commercial reasons, not to technical reasons, not to legal reasons, to commercial reasons. We tried to sell, it does not sell, we withdraw. So, today, this problem of supply that I sometimes hear is obsolete, it is really to revive this demand that exists. The need is there, the demand is there, but it is not necessarily solvent. And once we have restarted this demand, we will deal with the problem of the supply which will be insufficient.
What impact does this have on you, real estate developers? Are some of you having to make redundancies? Or are you having to close your doors altogether?
There is everything. In fact, the secret is cash flow and equity. Those who have a lot of cash flow and equity are keeping their heads down, but all of them, whatever their size, from the smallest to the largest French promoter, have all laid off staff, all are reducing their sails, if you will allow me the expression. And some have already closed their doors, unfortunately. But I have been announcing that for a long time.
Is the situation the same in all regions of France?
Yes, it is rather a national problem, it is a national situation. It is a problem that is global. There is no trust, there is no funding. So yes, it is national.
There is no room for maneuver, are you saying you cannot lower your prices?
No, that was the big debate we had with the government that said, but housing is too expensive, so let’s make the professionals suffer a little, they will adapt. And my debate has always been to say no, we have no room for maneuver, our margins are very low. And so what happens? We do not lower our prices because technically, we cannot do it. We leave the market.
We have a new Prime Minister, Michel Barnier. He has already spoken several times. Have his speeches given you confidence or have they worried you? Have you already had any discussions with him?
Prime Minister Michel Barnier’s speeches are rather reassuring for us. Every time he speaks, he says that we will have to tackle housing and in particular housing construction. So I know that he is interested in it. I have had somewhat one-sided contacts. These are messages that I left by SMS. I have not had a response, but I know that he has spoken to a few deputies or senators who have given me feedback.
He knows it very well, things are going very badly, we are halfway through the normal year, it is a time trial for us. There is the PLFR which is going to arrive, etc. We do not really have time.
“A very simple solution: don’t stop Pinel at the end of the year, postpone it for another three years.”
Pascal Boulanger, President of the Federation of Real Estate Developersto franceinfo
Pinel must end on December 31, 2024. We are asking that it be postponed for another three years. And in the version that was Pinel before 2022.
The Pinel scheme is a rental investment scheme that allows individuals to buy new property with a tax reduction provided that they charge capped rents, but normally it should stop at the end of the year. There is no budget yet, there is no government yet. So you say to yourself that it is not yet lost?
It’s not lost yet. Because in addition, last week, the Court of Auditors released a report on Pinel that was favorable, not perfect, but favorable. Which says that this is how tenants are happy. Pinel also allows programs to be launched because investors come at the beginning. It allows social housing programs to be launched. There is a crisis in social housing. We, the private developers, the FPI, we produce 54% of social housing in France. Since we do half as much, at a fair price, we produce half as much social housing as usual. So Pinel has this virtuous effect that allows programs to be triggered. Here, we are in a medical emergency. And the response to the medical emergency is not to stop Pinel on December 31. Put it back in the version that worked well before December 31, 2022. And you will see, it will work.
This report from the Court of Auditors explained that it only imperfectly fulfilled its construction objective, but that it had largely contributed to triggering real estate operations that could not have been completed, or could have been completed less quickly. It is impossible to evaluate the impact precisely, says the Court.