Numerous have been the comments about the Chinese real estate crisis with the near bankruptcy of two among the biggest property developers Evergrande and Country Garden, affected by a huge debt and an incapability to deliver the homes which had been bought by their clients. This situation has been considered as revealing of the current and the coming difficulties of the Chinese economy. But Beijing has just announced that measures will be taken to limit the financial consequences of that crisis which could have endangered the country banking system.
To the opposite, the spectacular fall in France of the building of accommodations since the beginning of the year has completely passed unnoticed when it will have a significant impact on the economic activity and could affect during a longtime household capacity to find a home. For the last twelve months, housing starts have fallen by 17.8%, coming from 379 000 to 305 800. They were near 400 000 before the sanitary crisis and had not fallen under 320 000 for more than ten years. An even more worrying signal because it gives an indication about coming constructions, the number of delivered planning permissions have fallen by 26%, coming back to 375 100 units. The construction sector has so lost 10 000 jobs since the beginning of the year when in many regions enterprises are confronted with a qualified masterwork penury.
All the metropolitan regions have been more or less affected at the same level. The observed diminutions so are not the consequences of an evolution of the family choices preferring a territory against another one but of a global problem reflecting household wait-and-see attitude and investors and real estate developers worries. To the opposite of their Chinese counterparts, these ones have postponed their projects. The French GDP diminution during the 3rd quarter (-0.1%) includes a reduction of the household investment by1.1% which sends the negative acquired growth of that activity for 2024 to -4.6%. The household saving rate remained very high (17% of the net available income) but that has profited to the financial savings (deposits, life insurance and stocks) with a historically high rate of 6.8%.
The main cause put forward for the housing construction fall is the interest rate brutal increase occurred since the 2022 Summer. It has not yet been as high as inflation and the real long-term rates, when is subtracted prices increase, remained negative. But most of the potential buyers need to obtain a credit and the banks have strict rules: the yearly reimbursement charge must not exceed a share of the family revenue. The rates increase has turned down household whose revenues had not enough increased to have access to a credit. No significant rate cut being expected in the coming months, a rebound of the housing market is extremely low likely.
The situation is also as worrying for the rented accommodations, and notably the social ones whose construction fell under 100 000 housing starts when 200 000 every year are needed to reduce the penury. The diminution of the construction has also been caused by the growing scarcity of the lands opened to construction. Many municipalities are hostile to the arrival of new inhabitants because they could put into question its political equilibrium and also frequently because neighbors do not wish to have their daily life affected by works which will take several years. They multiply the recourses against the delivery of the planning permissions.
Powerful actions also developed against “ground artificialization”. The solution to relieve the cities centers and to build new accommodations or new houses had, during a long time, consisted in broadening the urban perimeter through the transformation of agricultural lands or the utilization of the industrial wastelands. It is now much more difficult. If no solution is found to these obstacles to construction, at a time when French household needs are already far from being satisfied, local tensions are going to become worse.
Accommodations demand growth results from demography and from the society evolution. The life expectation increase has as a consequence that people remain for a longer time in their home and that the transmission to the following generations is slowed. To that must be added the strong growth of the mono-parental families. When a house or an apartment was enough to live, now two ones are necessary. At last, the diminution of the attractiveness of the rural villages due to the lack of social services and of nearby shops has as a consequence that when the homes are abandoned by their occupants, they do not find new ones. The inventory of unoccupied homes doesn’t stop to increasing because they are badly located.
Old accommodations prizes are falling because the interest rates rise has excluded from the market many potential buyers, which has increased, there too, the number of unoccupied ones. In the same time the rise of the raw material prices which has been transferred to the construction materials has made dearer the cost of the renovations and of the new accommodations which has weighted both on the supply and on the demand.
The State, so, seems not to have been conscious of the structural character of the current crisis. It thinks that it is only a short-term phenomenon provoked by the rates increase. Huge amounts of money, even if there has been a reduction, are still spent in the budget or through fiscal incentives to help French people to buy a home or to pay their rent. They went from 25 billion in 2000 to 42 billion as an average during the 2012-2017 period. This amount has been revised downward but it still represented 38 billion in 2022. The social crisis which regularly affect the suburbs of many large cities show that this supporting policy has not given the expected results and that the lasting penury which is announced, if no action is launched, will make the situation worse.
The thermal renovation policy must also take into account the market conditions. If not, it risks to make that situation even worse. It mainly regards rented accommodations in urban environment. But it is there that is located the current penury. The subventions exist but the complexity to get them and the lack of qualified workforce to do so many works in a such short time carry the risk, in the coming years, of forbidding the rental of hundreds of thousand homes in the zones where it already begins to have not enough supply. Nobody is able to tell where the evicted tenants or where these who want to get a flat could be able to find another residence or to buy it if they have enough financial resources.
The housing crisis which is coming will also have consequences on employment. Enterprises have difficulties to recruit because frequently the potential candidates have not found a solution to get a place to live, in a large city because rents are not compatible with the proposed wages or, outside these agglomerations, because no home is available at a reasonable distance. France so will not be able to recover full employment if no remedy is found. It is the duty of the government to have a right appreciation of the size of the crisis which is coming and to find the appropriated solutions.