This year, the number of subcontracting notifications for construction projects has decreased compared to last year, but the amount per notification has increased. In the private sector, the amount of notifications from corporations rose by over 30%, while notifications from individuals dropped by 40%, resulting in corporations accounting for more than three-quarters of the total private notification amounts. Analysts suggest that this trend is influenced more by rising construction costs and changes in the composition of orders rather than a recovery in the overall subcontracting market.
According to an analysis by Aju Economy of statistics from the Ministry of Land, Infrastructure and Transport's Construction Industry Knowledge Information System (KISCON), the number of subcontracting notifications from January to September this year totaled 57,443, a decrease of 5,888 notifications, or 9.3%, from 63,331 during the same period last year.
In contrast, the total notification amount increased from 66.6655 trillion won last year to 67.7428 trillion won this year, an increase of 1.0773 trillion won, or 1.6%. The average amount per notification, calculated simply by dividing the total amount by the number of notifications, rose from approximately 1.053 billion won to 1.179 billion won, a 12% increase. Although the number of notifications has decreased, the size of each notification has actually grown.
This trend is not limited to specific periods or regions. Monthly data shows that from February to September, the amount per notification increased in all eight months compared to the same month last year. Regionally, 15 out of 17 cities and provinces, excluding Daegu and Sejong, saw an increase in the amount per notification. Conversely, the number of notifications decreased in 14 cities and provinces, excluding Seoul, Busan, and Gwangju.
When examining the data by type of issuer, the amount of subcontracting notifications from private corporations increased from 20.2696 trillion won to 26.9116 trillion won, a rise of 6.6420 trillion won, or 32.8%. In contrast, notifications from private individuals fell sharply from 13.2336 trillion won to 7.9249 trillion won, a decrease of 40.1%. The share of corporate notifications in the total private order amount rose from 60.5% to 77.3%, an increase of 16.8 percentage points. The share of private corporations in the overall subcontracting notification amount expanded from 30.4% to 39.7%.
Jeon Young-jun, head of the Research Center at the Korea Construction Industry Institute, stated, “Although the number of subcontracting contracts has decreased due to a sluggish construction market, the nominal contract amounts have increased due to rising construction costs. We are currently seeing a situation where the number and amount are moving in opposite directions.”
He added, “Private individual orders often involve relatively small-scale development projects, and the recent market conditions may have led to a decrease in such projects. On the other hand, private corporations may be influencing the statistics with large projects like semiconductors.”
In fact, the construction industry's sentiment remains weak. According to the Korea Construction Industry Institute, the Construction Business Survey Index (CBSI) was at 72.7 in August. The number of construction workers decreased by 3% compared to the same month last year. Meanwhile, the construction cost index rose by 5.8% year-on-year, continuing to exert cost pressure.
Jeon emphasized, “For the market to be considered recovered, both the number of contracts and the amounts need to increase together, but currently, these two indicators are moving in opposite directions. It is still difficult to conclude that the construction industry has gained vitality or that company profitability has improved based solely on the increase in notification amounts.”
Park Won-gap, a real estate expert at KB Kookmin Bank, suggested that measures to reduce costs, such as shortening construction periods, should be developed to alleviate the burden on small-scale private projects. He noted that while expanding financial support is challenging due to issues related to project viability and guarantees, it is necessary for relevant agencies to review this together.
* This article has been translated by AI.
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