2006 was a stellar year for France’s building and public works industry. Activity in the sector rose by 8% in volume terms, outpacing the service sector (+6.4%) and industry (+4%). Forecasts for 2007 point to another solid growth year.
The building sector was especially dynamic, rising by 5% in volume terms. New
housing starts hit new records in 2006, climbing to nearly 436,000 units, a 9.7% jump on the year. In contrast to recent years, non-residential building was also strong, up 7.3%. Within this market, three sectors were especially buoyant: offices (+13.5% by volume), public buildings (+7.5%) and industrial buildings (+6.4%).
The French Building Federation (FBF) has just published its forecasts for 2007 in which it estimates overall building activity will rise by 2.9% this year. It believes activity will again be led by new housing although it suggests that higher prices in will dampen the enthusiasm of the private sector. The FBF forecasts an increase of +4.1% for new housing starts and a 4.2% rise in new non-residential buildings.
Strong demand in the building sector has lead to a surge in the cost of construction. While the overall cost of living index in France rose just by 1.5% in 2006, one of the lowest levels of the EU, the cost of construction index surgedby 8.06%. As of Jan 2006, this index is no longer used to re-calculate annual rent indexes in the private sector although it is still frequently used for commercial leases.
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