Soaring construction costs are beginning to weigh on the production of new homes, warned the Federation of Real Estate Developers (FPI) on Thursday during its quarterly update.
In the second quarter in France, new home sales, a key indicator of developer activity, fell by around 11% compared to 2021, according to data from the REIT.
At least three-quarters of this decline comes from the reluctance of mayors to grant building permits, argued the president of the FPI Pascal Boulanger, taking up a recurring grievance from developers for several years.
But a new phenomenon has arrived that we are beginning to see very seriously, (…) it is that many promoters are stopping operations for economic reasons.
They have their license, it is purged of any recourse, (…) they have a marketing which is starting and which is rather good, and then they have the answers to their calls for tenders, and there, nothing goes through.
It’s really an economic problem: we started selling, we made estimates with the project managers, we say the construction cost will be so muchand when you get started, the cost prices soar, lamented Pascal Boulanger.
Construction costs have been rising since 2020, due to the disruption of material supply chains due to the pandemic, and soaring energy prices aggravated by the war in Ukraine.
In terms of housing reservations, an indicator of demand, the decline is very clear (-24.3% over one year) and above all due to investors. It is much less marked for individual first-time buyers.
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Social landlords in particular have put a lot of brakes on their orders, again because of the rise in construction costs.
Often, in the territories, there are charters imposed by the communities on the social landlords which cap the price of acquisition of housing, explained Didier Bellier-Ganire, general delegate of the FPI.
However, with the rise in costs, sometimes we are above these ceilings, and therefore sales are not made, or else it takes much longer, you have to negotiate, review your charters…
Average selling prices per square meter have soared outside the Paris region, +6.8% in one year, while they seem to be stabilizing in Ile-de-France (+2.5%) where they nevertheless remain much more raises.