The chamber of trades and the crafts federation fear that some 1,500 housing projects out of 3,800 may not be built in 2023. (Photo: Matic Zorman/Maison Moderne/Archives)

The chamber of trades and the crafts federation fear that some 1,500 housing projects out of 3,800 may not be built in 2023. (Photo: Matic Zorman/Maison Moderne/Archives)

The Chamber of Trades and the Federation of Crafts are sounding the alarm: the production of completed housing could fall by 40% in 2023. To counter the crisis in the construction sector, they are proposing six temporary emergency measures to be applied over the next 12 months.

2023 looks bleak for the housing construction sector. So much so that the Chamber of Trades and the Federation of Crafts are sounding the alarm and proposing temporary emergency measures, six in all, to be applied over the next 12 months. The aim is to avoid a slowdown in the pace of construction, and to stave off a slump in supply that would further increase prices. This is because whatever is not built in 2023 cannot be made up for in the following years.

Serial crises and deteriorating economic climate

How did this situation come about? The housing construction sector is suddenly under pressure from three factors: the pandemic, the war in Ukraine and the energy crisis.

First of all, an explosion in the cost of energy and personnel. But also materials. Although prices have fallen since the start of the war in Ukraine, they remain very high compared to January 2020: +56% for wood, +39% for reinforced concrete mesh.

Secondly, the rise in mortgage rates. The fixed rate has passed 3% and the variable rate has risen by one point in the last four months.

Finally, the context of general uncertainty which is depressing demand and investment.

Figures show the extent of the problem. Compared to the first half of 2021, the number of building permits in the first half of 2022 has fallen by 34% in the residential sector. The number of sales transactions for new flats between the first half of 2019 and the second half of 2022 has fallen by 23%. New housing loans for households fell by 6% in the first 10 months of 2022.

1,500 housing units not built

All indications are that the situation will get worse in the coming months. The Chamber of Trades and the Federation of Crafts estimate that, over the year 2023, the production of completed housing will collapse by 1,500 units, from 3,800 to 2,300.

They have proposed six temporary emergency measures that they would like to see put in place for the next 12 months:

- Abolish the 7% registration fee on the share of construction already completed (idem to the sale in future state of completion--VEFA).

- Mobilise the Special Fund to support the development of housing to enable public actors to acquire private projects that have been put on hold.

- With regard to the 3% housing VAT, raise the current ceiling from €50,000 to €100,000 per dwelling created or renovated.

- Temporarily reintroduce the 3% VAT rate on the construction of (new) rental housing.

- Increase the tax credit from €20,000 to €30,000 on notary acts.

- Review certain measures to maintain the attractiveness of this type of investment, especially in the current context. In particular, reconsider the reduction of the accelerated depreciation from 4% to 2% (the 4% rate can be applied a maximum of two times) and link the maximum return on investment to the evolution of interest rates.

“All the precursor indicators are in the red: a drop in the order book, a fall in the volume of authorised buildings, a fall in property loans,” note the two professional bodies. There is therefore a real danger on the horizon for the construction (4,000 companies, 60,000 jobs) and craft industries (8,500 companies, 102,000 jobs), which have a certain weight in the national economy.

This article was first published in and has been translated by Delano.