SEOUL, March 12 (AJP) - Anxiety is mounting among small and mid-sized construction firms in South Korea as a wave of bankruptcies sweeps through the industry.
At least seven companies, including Shindonga Construction and Sambu Construction, have filed for court receivership this year, underscoring the financial distress gripping the sector.
According to data from the Ministry of Land, Infrastructure and Transport, 109 construction firms shut down by February 28 this year — an average of 1.8 per day. That figure marks the highest rate of closures since 2011, reflecting mounting pressures on the industry.
The downturn in South Korea’s real estate market, coupled with soaring construction costs, high interest rates, and a growing inventory of unsold homes, has created a punishing environment for builders.
Particularly concerning are units that remain vacant even after completion. In February, their number reached 22,872, the highest level in more than 11 years and a 6.5 percent increase from the previous month, according to government housing statistics.
Compounding the crisis, debt levels across the construction industry have soared past critical thresholds.
Data from the Financial Supervisory Service shows that as of the end of 2023, Daewoo Shipbuilding & Marine Engineering Construction held a staggering debt ratio of 838.8 percent, while Sambu Construction stood at 838.5 percent and Shindonga Construction at 428.8 percent.
These figures far exceed the 200 percent threshold widely regarded as the industry’s danger zone. Other firms facing alarming debt burdens include Hanyang Industrial Development (820 percent), Isu Construction (817 percent), Daebang Industrial Development (513 percent), and Dongwon Construction (344 percent).
“The construction industry is teetering on the brink of collapse as the housing and real estate markets fail to rebound,” said Na Kyung-yeon, director of the Economic Finance and Urban Research Office at the Korea Construction Industry Research Institute. “Declining sales and profits are forcing an increasing number of firms out of business.”
Na warned that without systemic reforms, the industry’s viability remains in jeopardy.
“For the sector to be sustainable, there must be legal mechanisms ensuring that project owners account for appropriate construction costs,” he said. “Institutional safeguards should also be introduced to accommodate price fluctuations."
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