DIY

Introduction French Gardening Market French Bathroom Market – DIY, Spending and Market Update on the French DIY sector A Frenchman's home is his chateau A snapshot of the DIY customer The retailers

The French DIY market is the third largest in Europe, valued at 17Bn. Average growth has been 4% a year over the last 10 years, about double the GDP growth. Yet the market is not nearing maturity. At €666/household the average French DIY expenditure still lags UK and German households by a good 15%. We believe that the French DIY market will continue to outpace GDP growth for the coming years and represents a real business opportunity for companies that target intelligently the constructive French home owner.

House building was buoyant throughout the 1990s and even after the French economy stumbled in 2001, it still outpaced economic growth. Despite falls in demand for overall construction work, house building and DIY were resilient. Completions typically run between 250 and 300,000 new dwellings a year, making France one of Europe’s most robust housing markets. The DIY market has followed this trend and all the signs are that 2004 will represent a year of renewed growth for the DIY/home maintenance market. There are two main reasons for our continuing optimism on French DIY.

Legislation: French households are extremely receptive to legislation concerning housing. Just to give one example: the ‘de Robien’ measure was introduced at the start of 2003 to promote new housing starts by allowing taxpayers to offset capital costs against rental income from new property. Although the measure is limited, its impact has been significant. New housing starts hit a record number in 2003 and some 20% can be attributed directly to the advantages of the de Robien legislation. The table below illustrates this. Most significantly for the DIY market, the level of VAT on home improvement was reduced from 19.6% to 5.5% just a few years ago. Originally flagged as a temporary measure to boost the construction industry, the government recently prolonged the lower VAT rate.

Life-style: Like elsewhere across Europe, there are key socio-economic factors that have coincided in recent years to encourage home ownership: other asset classes have disappointed (e.g. the poor returns of the stock market), interest rates are at historic lows, households are concerned to build long term security as part of their retirement planning and employees are more mobile so there is more demand and more supply of houses.

The Housing Stock: France has the largest stock of housing in the EU, when measured on a crude number per thousand population basis. At Jan 2002, France counted some 29.5M residences, a fifth of which was built since 1980 and two-thirds since 1945. The size of France’s housing stock is accounted for partly by the relatively large number of second homes (about 10%), particularly around the Mediterranean. The trend to convert principal residences into secondary homes has accelerated since 1997. France also counts a high level of vacancies (6.8%) which are associated with the continued rural drift to urban centres, although the level of vacancies is declining as demand for secondary houses soaks up the supply.

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