The specter of failure hangs over homebuilders

For months, even years, apartment builders have been warning of the deep crisis the sector is going through. More serious than the problems with the old properties are the new properties, which are facing costs that are increasing in all directions: construction costs, standards and land. And on the other hand, demand is no longer able to keep up, as rising interest rates (although now stagnant) have reduced buyers’ capacity to borrow. In these conditions, unlike old properties, it is almost impossible to achieve adjustment by falling prices.

The result: developers and homebuilders have found themselves faced with squaring the circle, and many of them have no choice but to cut jobs. And now, as things get stuck, the risk of failure for the most vulnerable is becoming increasingly clear. According to a study by Altares, the 4th quarter of 2023 is one of the worst in the last 30 years in terms of total defaults, with the construction sector accounting for 24% of bankruptcies. It now has more than 14,000 defects, of which almost 11,000 are in construction activities alone.

Restructuring plan

A symbol of this fragility, the AST group, France’s second largest housebuilder, is currently facing major difficulties. While its share price has already fallen 66% in 2023 and 33.5% year-to-date, the brand called for a trading halt in its stock this Monday. The group, present mainly in the field of modular wooden constructions with brands such as Natilia or Natibox, nevertheless ended 2023 with a turnover increase of 15%. But faced with difficulties and cost inflation, the brand had to launch a restructuring plan with subsequent job cuts.

Is the situation going to get worse? Professionals in the field are not calm. “Public authorities are determined to introduce a supply shock that makes no sense in the new real estate sector! complains Damien Hereng, president of the French Federation of Individual Home Builders.Until they understand this, more and more operators will have big problems. The more time that passes, the more difficult it will be to restore the situation.” And on the collective housing side, Pascal Boulanger, president of the Federation of Real Estate Developers, has the same concern, who at the end of February challenged the Minister of Housing in this way: “Mr. Kasbarian, you are the Minister of the Last Chance! Your decision must help prevent this housing crisis from turning into an uncontrollable social crisis.”

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