Private housing orders have increased for two consecutive months, but 34% of the order value in August was concentrated in two large redevelopment projects. Analysts suggest that the overall recovery of the construction market is difficult to assess due to worsening conditions for mid-sized and small construction firms.
According to data compiled by the Korea Construction Association and reported by Aju Economy on October 15, the value of private housing orders rose from 5.7189 trillion won in June to 6.4611 trillion won in July, and further to 7.3469 trillion won in August. The August order value increased by 13.7% from the previous month and by 28.5% from June.
However, the cumulative total for June to August this year stands at 19.5269 trillion won, a 9.4% decrease from 21.5452 trillion won during the same period last year. The August order value also fell by 1.5% compared to the same month last year. While recent monthly performance has improved, it still falls short of last year's levels.
The August figures included approximately 2.1 trillion won from the special planning area 4 redevelopment project in the Apgujeong apartment district in Seoul and about 400 billion won from the Sajik 3 redevelopment project in Busan. Together, these two projects accounted for about 2.5 trillion won, or 34% of the private housing orders for that month. This also represents 22.6% of the total private construction orders, which include non-residential buildings and civil engineering.
Despite the increase in housing orders, the total private construction orders for August reached 11.0426 trillion won, a decrease of 17% from the previous month and 13% from the same month last year. Orders for non-residential buildings and civil engineering fell by 46.9% and 43.8%, respectively, compared to the previous month.
Perceptions of the construction market varied by company size. The Construction Business Survey Index (CBSI) for September showed that large companies had a score of 91.7, an increase of 8.4 points from the previous month, while mid-sized companies dropped to 68, down 5.1 points, and small companies fell to 60, down 1.8 points. The gap between large and small companies widened to 31.7 points, an increase of 10.2 points from the previous month.
Construction cost burdens continue to rise. The construction cost index for August was 138.74, up 6% from the same month last year, surpassing the consumer price inflation rate of 3.1% during the same period.
Lee Ji-hye, a researcher at the Korea Construction Industry Institute, noted that large redevelopment project orders primarily benefit large companies, while mid-sized construction firms face challenges with project financing, construction cost burdens, and unsold properties in local areas. She explained that while some large projects may boost order performance next year, it will be difficult to resolve issues related to construction costs, interest rates, and financing in the short term.
Lee emphasized that for the rebound in orders centered on large redevelopment projects to spread to the overall private construction market, improvements in the feasibility of general housing projects and the recovery of financing conditions for mid-sized and small construction firms are essential. She stated, "We must prioritize resolving liquidity issues for mid-sized and small construction firms, which face significant challenges in terms of creditworthiness and bond issuance for financing."
* This article has been translated by AI.
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