Raw Material Crisis Halts Construction Sites... Q1 Groundbreaking Area Drops 16%

Permitted Area Increased by 14% Compared to the Same Period Last Year

As the price of raw materials for construction skyrockets, conflicts over construction costs are spreading, and the nationwide construction start area in the first quarter has decreased by about 16% compared to the same month last year.

According to the "2022 First Quarter Nationwide Building Permit Status" announced by the Ministry of Land, Infrastructure and Transport on the 3rd, the permit area increased by 14.0% compared to the same period last year, but construction starts decreased by 15.8%, and completions decreased by 16.4%.

As of the end of March this year, the nationwide permit area was 40,751,000㎡, an increase of 5,019,000㎡ compared to the same period last year (35,732,000㎡) due to an increase in apartments and factories, while the number of buildings was 46,435, a decrease of 5,072 buildings compared to the same period last year (51,507 buildings). Building permits are a leading indicator of the construction market, and the increase in permit area this quarter is expected to activate investment in the construction sector in the future.

The nationwide construction start area was 26,021,000㎡, a decrease of 4,890,000㎡ compared to the same period last year (30,911,000㎡) due to a decrease in the construction start area of apartments and others, and the number of buildings was 34,726, a decrease of 5,853 buildings compared to the same period last year (40,579 buildings).

The nationwide completion area was 26,372,000㎡, a decrease of 5,192㎡ compared to the same period last year (31,564,000㎡) due to a decrease in the completion area of apartments and others, and the number of buildings was 35,716, a decrease of 2,974 buildings compared to the same period last year (38,690 buildings).

Construction starts, a coincident indicator, and completions, a lagging indicator, are expected to have decreased partly due to the impact of COVID-19 and rising raw material prices.

Meanwhile, according to the construction and implementation industry, as of the end of last month, the average construction cost per 3.3㎡ (pyeong) rose by 10?15% over four months compared to the end of last year, and by 25?35% compared to October last year.

This is due to the intensification of the global raw material supply shortage that has continued since last year due to Russia's invasion of Ukraine, which has led to a full-scale price increase.