Economic studies


Latin America
Northern America
Central & Eastern Europe
Western Europe
Emerging Asia
Middle-East & Turkey
Change sector


  • Global demographic growth and the trend towards urbanisation underpin demand for housing
  • Low interest rates facilitate lending


  • Property prices remain overvalued in many OECD countries
  • High household debt
  • Overcapacity in China 

Risk assessment

Building permits

Building permits
(Annual change, as %)

In 2016, industrialised countries saw their property markets benefit from the rise in household income, which in turn was buoyed by very low inflation (0.8% on average). In addition, low rates played a catalytic role, with property loans seeing a sharp increase.

In Europe, companies appear to be relatively sound, in line with the decline in bankruptcies. This trend is expected to continue in 2017, with the exception of the United Kingdom, where it is expected that the effects of the Brexit debate will result in lower net confidence in UK households, foreign investors and the depreciation of the pound, thereby increasing the cost of imports used in the sector.

The expectations of the tightening of US monetary policy in December and uncertainties related to the presidential elections led the sector to slow down in the second half of 2016 in the United States.

The risks are higher in emerging countries. In China, the surge in property prices is unsustainable and household debt is starting to grow (40% of GDP in 2016). In Latin America, the market will continue to be hampered by unemployment and inflation. In the Middle East the loss of income due to the weakness in the cost of a barrel of oil and ongoing security risks hinder the performance of the sector.


In Europe, after a long period of sluggishness, construction companies will benefit from healthy demand in 2017, enabling them to consolidate their cash flow. Moreover, the presence of multinationals in emerging countries will be less crippling than in 2016 as growth is expected to rebound (+4.1% in 2017).

At the end of the third quarter of 2016, the LafargeHolcim Group, the world leader in sales of construction materials, recorded lower turnover than in the first three quarters of 2015 (-1.8%). While the group recorded a decrease in its turnover in all regions, North America showed the most resilience (-0.6%). It highlights the existence of binding markets such as India and Malaysia where an overcapacity in construction is exacerbating competition or in Brazil where there was a lack of opportunities in 2016. The sector could nevertheless rebound in Brazil as early as 2017 as President Temer has implemented a "plan" to attract local and foreign investors through 34 infrastructure projects related to the privatisation of airports, rail, power and even water companies. Furthermore, Coface expects to see a rebound in business in Brazil of some 0.6% in 2017. In Mexico, despite a well-oriented growth (+1.5% in 2017), the country, the first trading partner of the United States, could suffer from the election of Mr. Trump. In addition, a decline in the price of raw materials led the government to lower its spending. The State has cancelled two passenger railway transport projects. (The Mexico-Querétaro and Merida-Cancun lines) and in 2016 announced a $720 million reduction in its infrastructure spending.

Likewise, although in the Middle East housing supply is being supported by several infrastructure projects, such as in Qatar (2022 World Cup) and Dubai (Expo 2020), low oil prices have resulted in a drop in the number of development plans for the region. In fact, its public deficit has sky-rocketed, and Saudi Arabia and Oman have cancelled two railway projects.

In Europe, the demand pressure on construction services is palpable. In France, employment in the sector rose  in 2016 for the first time since 2012. Although, structurally speaking, there is a shortage of new homes, the renewal of the Pinel Act is supporting housing projects for the rental market. The French Government has set itself the target of building 500,000 new homes a year. The situation is similar in Germany, with a year-on-year rise in employment in the sector at the end of March 2016, after a decline between 2011 and 2015. In Europe, 2017 will continue to see cheap mortgages which will put greater pressure on housing supply. Prices in these regions will continue their upward trend.


Households’ situation seems resilient and prices are picking up in advanced countries in 2017. But this recovery is taking place at a time when overvaluations of property prices persist (New Zealand, United Kingdom, France, Canada, Sweden, Belgium) and households remain highly indebted (United States, United Kingdom). Concerning emerging countries, housing demand in Asia is resisting pressures while a fall in commodity prices has upset household incomes in South America and the Middle East. By the end of 2017, average selling prices could return to their 2008 pre-financial crisis level.

Inflation will increase significantly in advanced economies in 2017 (1.7%). As a result, the key interest rates of some major central banks may rise, mainly in the United Kingdom and the United States. Although the American cycle seems to be doing a turnaround, the construction sector is likely to be supported by public works. While Mr. Trump has made it one of the priorities of his presidential campaign, the ageing US infrastructure should be modernised. In Europe, the demand for housing will also be bolstered by the arrival of immigrants (3 million in 2016 and 2017 according to the European Commission). In Germany, while building permits have increased by 17% in 2016, this dynamic will benefit the sector in 2017. The Iberian peninsula is also rapidly rebuilding itself, with a 15% increase in permits in 2016 in Spain and more than 35% in Portugal. In addition, activity in southern Europe (expected GDP growth at +2.3% in Spain, +0.8% in Italy and +1.3% in France) will also drive the sector.

Although emerging oil and metal exporters will benefit from a slight rise in prices in the first quarter 2017, the extent of the lower prices in 2015 has resulted in either the introduction of taxes or the cutting of grants in order to protect the public coffers (Brazil, Colombia, Ecuador, Malaysia, Saudi Arabia). This additional cost for households will continue to hamper their recovery and put a halt to property purchases in 2017. Moreover, despite these taxes, exporting nations have seen an increase in their national deficit and have cut back on their infrastructure investment plans, (Saudi Arabia, Qatar).  

After a period of rapid development in China, growth in the property sector will slow down due to overcapacity. The effects of the fiscal stimulus that began in 2016 will wind down and property investment will stagnate in 2017. Nevertheless, it is becoming increasingly likely that broader adjustments will be needed in the sector. Coface corporate payment survey in China (March 2016) also revealed numerous payment delays within the sector.


Last update : December 2016

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