In the second quarter of 2026, while some leading indicators in the construction market showed signs of improvement, the performance of coincident indicators, which reflect actual economic conditions, remained weak, suggesting limited recovery ahead.
The Korea Construction Policy Institute released a report on June 30 titled "Construction Market Indicators and Issues for Q2 2026," evaluating the construction, specialized construction, and housing markets for the second quarter and providing forecasts for the third quarter.
According to the report, the construction market in the second quarter saw improvements in some leading indicators, such as construction orders and building starts. Cumulative construction orders as of April increased by 33.6% compared to the same period last year, and the area of building starts rose by 4.4%.
Conversely, the area of building permits decreased by 3.6%, and construction performance fell by 6.0%. Despite the rebound in leading indicators like orders and starts, the coincident indicators that connect to actual construction progress and revenue remain sluggish.
The institute anticipates that while improvements in key construction indicators are expected in the third quarter, the recovery will be limited. The improvements in leading indicators during the first half are attributed to base effects and early execution of public sector finances, making it crucial to determine whether the increase in orders will translate into actual starts and performance.
The specialized construction sector saw an increase in contract amounts primarily due to the overall rise in construction orders. However, this is partly a reflection of the base effect from the decline in contract amounts experienced last year, indicating that further confirmation of market recovery is necessary.
Notably, the Business Sentiment Index (BSI) for the specialized construction sector recorded its lowest level in three years. Industry players continue to face burdens from rising construction costs, material prices, and labor costs, resulting in a slow recovery in sentiment.
In the housing market, prices are continuing to rise, particularly in the metropolitan area. Despite weak leading indicators for housing supply, the sale prices of apartments in Seoul have been increasing at a rate higher than the national average. The rental market is also showing strength, with rising prices for both jeonse (long-term lease) and monthly rent in Seoul.
The institute predicts that consumer sentiment in the housing market will recover in the third quarter, likely sustaining strong trends in both the sales and rental markets. The rebound in consumer sentiment indices for housing markets nationwide and in the metropolitan area supports this outlook.
Industry experts emphasize that for the construction market recovery to extend beyond mere indicator rebounds, stability in construction costs and improved conditions for project financing (PF) are essential.
Park Seon-gu, head of the Korea Construction Policy Institute, stated, "Despite the rebound in some leading indicators, the construction market continues to face bottlenecks in the transition to actual starts and performance due to rising construction costs and burdens in PF financing. To facilitate recovery in the construction market in the second half, it is crucial to alleviate cost burdens, improve financing conditions, and implement policy responses to address bottlenecks at various stages."
* This article has been translated by AI.
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