The Deepening Crisis in New Real Estate

the Federation of Real Estate Promoters (FPI), led by Pascal Boulanger, recently presented its quarterly assessment, revealing a sector struggling against persistent headwinds. Despite government interventions, the new real estate market continues its nearly two-year decline. This situation demands a closer examination of the underlying causes and potential solutions.

construction Permits: A Glimmer of Hope, But Still Insufficient

While construction authorizations saw a modest increase of 4.9% between the first quarters of 2024 and 2025, they remain considerably below pre-crisis levels. The average quarterly volume of authorized dwellings (all types combined) stood at 84,600, a stark contrast to the 113,300 recorded between 2015 and 2018. This indicates a persistent drying up of the offer, despite a slight uptick at the beginning of 2025.

The decline in supply can be traced back to recent municipal elections, with the situation worsening even after a year has passed as the new elections.This prolonged impact underscores the need for proactive measures to stimulate construction and address the housing shortage.

Asphyxiation of the Real Estate Sector

The number of sales over a three-month period has plummeted by 16.5% between the first quarters of 2024 and 2025. Since 2023, sales have decreased by a staggering 38%. The FPI reports that 26% of real estate operations have been withdrawn over the past year, a figure unprecedented in recent history. This alarming trend highlights the severe challenges faced by developers and the urgent need for intervention.

This downward trend appears set to continue, with total new housing reservations dropping by 10.3% over three months. Though,a closer look at the FPI data reveals two distinct trends:

• Continued decline in individual housing sales: This suggests a lack of consumer confidence and affordability issues.
• Slight resilience in collective housing sales: This could be attributed to increased demand for affordable housing options in urban areas.

The real estate sector is facing unprecedented challenges,requiring innovative solutions and collaborative efforts from all stakeholders.

Prices Remain Stubbornly High

Despite the significant drop in sales, new housing prices are not decreasing at the same rate. Several factors contribute to this price resistance:

• Increased construction costs: Rising material and labour costs are putting upward pressure on prices.
• land scarcity: Limited availability of suitable land for advancement is driving up land prices.
• Regulatory burdens: Complex and time-consuming regulations are adding to development costs.

This price resistance creates a challenging situation for potential buyers, who are already struggling with rising interest rates and economic uncertainty. The combination of high prices and declining sales is creating a perfect storm in the new real estate market.

Looking Ahead: Potential Solutions and Strategies

Addressing the crisis in the new real estate market requires a multi-faceted approach.Some potential solutions include:

• streamlining regulations: Reducing bureaucratic hurdles and accelerating the permitting process can lower development costs.
• Incentivizing construction: Offering tax breaks and subsidies to developers can encourage new construction.
• promoting affordable housing: Investing in affordable housing projects can address the needs of low- and moderate-income families.
• Addressing land scarcity: Exploring innovative land use strategies,such as vertical development and brownfield redevelopment,can increase the supply of available land.

By implementing these strategies, policymakers and industry stakeholders can work together to revitalize the new real estate market and ensure that housing remains accessible and affordable for all.

A Two-Sided Coin: Owner-Occupiers Surge, Investors Retreat

The french new real estate market in the first quarter of 2025 presents a stark contrast in buyer behavior. While sales to individuals intending to live in the properties have seen a significant upswing, investor interest has waned considerably. This divergence highlights the shifting dynamics within the sector and the impact of government policies.

• Owner-Occupier Sales Soar: Sales to owner-occupiers witnessed a substantial increase of 9.8%. This growth is largely attributed to factors such as reduced real estate rates and the expansion of the zero-rate loan (PTZ), making homeownership more accessible to individuals and families.
• Investor Sales Plummet: Conversely, sales to private investors experienced a sharp decline of 41.1% between the first quarter of 2024 and the first quarter of 2025. This dramatic decrease is primarily due to the removal of the Pinel scheme, a tax incentive program that previously encouraged investment in new rental properties.

Price resilience Amidst Crisis: A Closer Look

Despite the ongoing challenges facing the new real estate sector,property prices have demonstrated remarkable resilience. Contrary to expectations, prices have not only held steady but have even experienced a slight increase between the first quarter of 2024 and the first quarter of 2025, rising from €5,121 to €5,197 per square meter.

This price stability can be attributed to several factors:

• Stringent construction Standards: New constructions are subject to increasingly demanding standards, which drive up development costs.
• Rising raw Material Costs: The cost of raw materials used in construction continues to rise, impacting overall project expenses.
• Building Permit Challenges: Developers face increasing difficulties in obtaining building permits, further limiting supply and supporting prices.

Government Efforts and Lingering Market Obstacles

The French government has implemented various measures to stimulate the new real estate market, including efforts to control inflation (0.8% year-on-year in March 2025, compared to 3% in February 2024), expand the PTZ scheme, offer donation exemptions for new housing purchases, and encourage banks to provide funding. however, despite these efforts, the market remains constrained.

According to recent data from the National institute of Statistics and Economic Studies (INSEE), the construction sector is still operating below pre-pandemic levels, indicating persistent challenges in boosting new housing supply.

Industry Calls for Action: Rental Supply and Building Permits

The French Property Federation (FPI) has welcomed the commitment of the Minister responsible for housing,Valérie Létard,to revitalize the rental market. The FPI emphasizes the importance of implementing the “private lessor status,” a proposal led by Senator Marc-Philippe Daubresse and MP Mickaël Cosson, which aims to stimulate the production of at least 40,000 additional new rental housing units per year.

The simplification and acceleration of building permit issuance remain crucial for a lasting resolution to the crisis.

Streamlining the building permit process is seen as a critical step towards unlocking new construction projects and alleviating the supply shortage that is contributing to market stagnation. This sentiment is echoed by numerous industry stakeholders who believe that reducing bureaucratic hurdles is essential for fostering growth in the sector.

Looking Ahead: Navigating the Path to Recovery

The French new real estate market faces a complex and evolving landscape. While government initiatives and favorable financing conditions have boosted sales to owner-occupiers, the decline in investor activity poses a significant challenge. Addressing the supply shortage through streamlined building permit processes and incentivizing rental property development will be crucial for ensuring the long-term health and stability of the sector.