New housing: "The worst is yet to come", real estate developers face social breakdown

Christophe Bordet / Photo credit: Groupe Pascal Boulanger 18:50 p.m., November 16, 2023

Real estate developers are on the brink. With new home sales plummeting – -30% and listings down 50% in the third quarter – many of them are in a cold sweat. Some are starting to lay off workers, others are going out of business. According to Pascal Boulanger, the president of the observatory of the Federation of Real Estate Developers, the worst is yet to come despite Elisabeth Borne's decision to buy back some of the unsold new housing by social landlords.

How do you explain this sharp drop in new housing sales in France?

Pascal Boulanger: First of all, many mayors no longer want to issue building permits, because a construction site means months of work, inconveniences, residents who don't want cranes or excavators under their windows, possible legal actions. As a result, mayors are paralyzed. Secondly, there are very few buyers and those who book an apartment are withdrawing like never before. We are talking about 50% of individuals throwing in the towel, compared to 13% in normal times.

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There is a very detrimental psychological effect, customers believe that banks do not want to lend. This is not true, the banks want to reopen the floodgates of credit, but the buyers are not there, convinced that they will not get the precious financing at 4 or 4.5%. Household debt conditions also need to be eased so that they can become homeowners. I solemnly ask the Governor of the Banque de France. Finally, the State requires us to start construction work when we have 50% of reservations, but with the crisis, it takes so long today to reach this figure, that buildings are coming out of the ground with a considerable delay.

Real estate professionals are betting on a balance of new constructions below 100,000 units, can you confirm?

P.B.: In 2023, we should be around 90,000 new homes that have been built. I can tell you that this is the worst year for the sector. It's just historic since our statistics began in the 1970s, we've never seen anything like it.

Are we already seeing visible consequences on employment?

P.B.: Unfortunately, yes, we no longer replace resignations or retirements. Some colleagues are in judicial liquidation, as are notaries. There is also a lot of breakage in architecture firms. In my opinion, the worst is yet to come.

Prime Minister Elisabeth Borne announces a new plan for the purchase of new housing by social landlords to help developers get by, is this good news?

P.B.: You know the expression, if you don't have a thrush, you eat blackbirds. This is exactly what is happening to us and I must admit that I am very angry because when we sell to social landlords, we do not make any margin, the Prime Minister knows that. I ask him this question: "Do you know many companies that can live or survive for a long time in these conditions?" I don't! In fact, the government doesn't like private investor, they told me so! He doesn't like it because the individual demands tax advantages to become a homeowner and in addition as he is an ugly duckling according to them, he is reluctant to carry out expensive energy renovation work in condominiums, so the government prefers a single owner of the property, such as a real estate company or a social landlord to be quiet.

Finally, the government no longer wants to provide financial support for housing, because it thinks it will deflate the "bubble", deflate prices. This is a complete error of analysis, a heresy, because construction costs keep rising. Under these conditions, how do you expect developers to cut their tariffs? It's simply impossible.