The shadow of failure looms over home builders

For months, even years, housing builders have been warning about the sector’s deepening crisis. More serious than the difficulties affecting older real estate, new properties are facing costs that are increasing in all directions: construction costs, standards and land. And on the other hand, since the rise in interest rates (even if now stable) has reduced the borrowing capacity of buyers, demand is no longer able to keep up. In these situations, unlike older real estate, it is almost impossible to achieve adjustment from falling prices.

Result: promoters and creator of houses They are facing the challenge of equalizing the cycle and many of them have no other solution than cutting jobs. And now that the situation is becoming increasingly difficult, the risks of failure for the most vulnerable are becoming clearer. According to a study by the Altares firm, the fourth quarter of 2023 is one of the worst in the last 30 years in terms of overall failures, knowing that 24% of bankruptcies occur in the construction sector. The latter has now counted more than 14,000 defects, including about 11,000 defects in construction activities alone.

restructuring plan

Symbol of this weakness, France’s second largest home builder AST Group is currently facing great difficulties. While its share price had already fallen 66% in 2023 and 33.5% since the beginning of the year, the brand this Monday called for the suspension of trading of its title. The group, particularly present in the modular wooden construction sector with brands such as Netilia or Nettybox, nevertheless ended 2023 with turnover increasing by 15%. But facing difficulties and cost inflation, the brand had to launch a restructuring plan with resulting job cuts.

Is the situation going to get worse? Professionals in the field are not quiet. “Public officials are determined to impose a supply shock that makes no sense in the new real estate sector! Damien Hereng, president of the French Federation of Individual House Builders, complains.Until they understand this, more and more operators will be in big trouble. The more time passes, the more difficult it will be to restore the situation. And on the mass housing side, there are similar concerns among Pascal Boulanger, president of the Federation of Real Estate Developers, who called out the housing minister in late February as follows: “Mr. Kasbarian, you are the Minister of the Last Chance! Your decisions will help prevent this housing crisis from turning into an out-of-control social crisis.”

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