The slowing construction market is not good news, because for years now, not enough housing has been built. Over the past twelve months, it is estimated that there have been just under 400 000 housing starts, when 500 are needed 000 per year. Things could get even more complicated with soaring material prices. Between the war in Ukraine, and the supply problems, the prices of steel and aluminum, for example, have increased by almost 30% in the last six months, +20% for tiles, +9% for plastic products, etc. Result: since the beginning of the year, according to the French Building Federation (FFB), because of the materials, construction costs have already taken at least 5%.
To this must be added new environmental regulations which are much more costly, according to professionals. These new standards encourage, among other things, the use of less polluting materials, such as wood, rather than concrete or steel. The only problem: in one year, the price of wood has increased by more than 7%.
Interest rates are going up and this also plays a role, of course, already because developers are forced to borrow to build, and it becomes less profitable. In addition, the risk for them is to have more difficulty finding buyers for the homes they are building, because rising interest rates mean less favorable borrowing conditions. And then the banks tightened the rules for access to credit. In fact, individuals who want to invest in real estate are likely to be fewer in number.
Without forgetting that the government plans to intervene on rents. He thinks about protecting tenants from rising prices by blocking, for example, the benchmark rent index. This blocking is good if you are a tenant, but a little less if you are an owner. That means the amount of property you rent won’t keep up with inflation, and you’ll lose money. All these reasons are likely to slow down investment and construction and further reduce the rental stock… and therefore worsen the situation for French people in terms of housing. However, housing is the first item in the household budget.