The French building and construction sector will continue to enjoy good growth, outpacing the general economy - according to the forecasts released by the French government. Overall the industry is expected to grow by up to 3.3% this year, after the +3.5% of 2004. Typically, the French government divides the construction sector into residential, non-residential and public works.
The breakdown of the % growth rates is presented in the table to the right. Residential property continues to be the key driver, although much tamer than levels reached last year. In 2004, there was a spectacular rise in building permits and new housing starts, + 22% and 16% respectively, because of low interest rates combined with new tax incentives (Robien measure). Despite this strong base, housing starts should continue to be good, particularly for multi-family units, buoyed by continued low interest rates and a public spending programme.
The non-residential sector is less fortunate. Last year saw a rise of +1.7% in non-residential building activity and 2005 is likely to see growth of only about +1%.
The biggest drag on demand is from the industrial sector which suffers from over-capacity. The other main component of non-residential, namely office and commercial space is expected to fare better.
Public works activity could surprise this year. While growth is expected to be between +0.8% and +1.8%, demand could be greater, as activity is ramped up ahead of the 2007 elections. In 18 months time, France has national and local elections – typically preceded by lots of public building works which are visible to the electorate.
French construction - % growth rates
Source: ministry of interior
2004 (realised)
2005 (estimation)
Building
3.7
2.8 - 3.7
residential
5.0
4.3 - 5.2
non-residential
1.7
0.7 - 1.6
Public works
2.6
0.8 - 1.8
Total construction
3.5
2.4 - 3.3
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