Although construction orders have significantly increased this year, the lack of actual groundbreaking and investment has left the recovery of the construction market only partially realized. While public and civil engineering sectors have driven the rise in orders, the private housing sector continues to struggle, with many approved projects unable to commence, dampening the overall sentiment in the field.
According to the Ministry of Land, Infrastructure and Transport, the cumulative construction order value from January to April this year reached 70.7746 trillion won. Although this marks an increase compared to the previous year, experts caution that the concentration of orders in the public and civil engineering sectors makes it premature to interpret this as a full recovery of the construction market.
The core issue is a bottleneck preventing orders from translating into actual groundbreaking. The Ministry reports that the area for residential construction starts fell from 59.8 million square meters in 2021 to 26.8 million square meters last year, a decrease of 55.2%. Similarly, the area for non-residential construction starts dropped from 99 million square meters to 53.3 million square meters, a decline of 46.2%.
The gap between approved projects and those that have broken ground is also widening. Over the past five years, the average annual difference between approved and groundbreaking areas has been recorded at 38.2 million square meters. The cumulative gap has reached 190.9 million square meters, equivalent to 1.8 times the average annual groundbreaking area. This means nearly two years' worth of projects have received approval but remain stalled.
The sluggish groundbreaking is contributing to a decline in construction investment. From January to April this year, public construction output increased by 6.3% compared to the same period last year, while private construction output fell by 8.7%. Last year, real construction investment also saw a 9.9% decrease, marking the largest drop in 27 years since the 1998 financial crisis.
Industry analysts note that the time taken for orders to transition into groundbreaking and output has lengthened compared to the past. An analysis by the Korea Construction Industry Institute indicates that in the recent five years (2021-2025), it takes about three quarters, or nine months longer, for orders to convert into actual output compared to the previous five years (2016-2020).
Lee Ji-hye, a researcher at the Korea Construction Industry Institute, stated, "While recent construction orders are showing signs of recovery, particularly in public housing and private civil engineering, high interest rates, rising construction costs, stricter project financing reviews, and unsold inventory in local markets are preventing actual groundbreaking. If the bottleneck persists, it could lead to a decrease in available housing units in two to three years."
Seo Jin-hyung, a professor at Kwangwoon University, remarked, "Ultimately, the decline in project profitability and unfavorable sales conditions are causing delays in groundbreaking. The government needs to create an environment that facilitates smooth supply through the normalization of the project financing market and support for funding."
The Ministry of Land, Infrastructure and Transport is also working on measures to alleviate the groundbreaking bottleneck. Kim Gi-yong, head of the construction policy division at the ministry, noted on the 18th, "The increase in orders is not translating into groundbreaking, output, or investment recovery. The sluggishness in approvals and groundbreaking could impact future housing supply as well as the rental market." He added that the ministry is considering tailored support measures for projects experiencing delays in groundbreaking.
* This article has been translated by AI.
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