Construction Recovery Depends on Financial Market Stability
Housing Prices Confirm 2024 Low... 'L'-Shaped Fluctuation
View of downtown apartments from ASEM Tower, Samseong-dong, Gangnam-gu, Seoul / Photo by Yonhap News
[Asia Economy Reporter Noh Kyung-jo] It is forecasted that domestic construction investment will decrease by 0.4% next year, and apartment sale and jeonse prices in the Seoul metropolitan area will fall by 3-4%.
Park Seon-gu, a research fellow at the Korea Construction Policy Research Institute, stated at the '2023 Construction and Housing Market Outlook' seminar held at the Professional Construction Hall on the morning of the 29th, "Construction investment will continue to be in a slump due to a decline in non-residential construction investment caused by economic slowdown and sluggish civil engineering investment due to reduced social overhead capital (SOC) budgets."
This year’s construction market saw an increase in building permits, but the burden of financing and rising construction costs acted as constraints, leading to a decrease in groundbreaking. Researcher Park predicted that this trend will continue into next year, delaying the recovery of the construction market.
He added, "Whether the construction market slump will persist or shift to a recovery phase depends on the stability of the financial market," and forecasted, "From 2024, when inflation eases and the financial environment improves, the market will enter a recovery phase."
Regarding the housing market, despite the government's active efforts to improve regulations, demand has sharply contracted due to already high prices, high interest rates, and repayment burdens, leading to a recession phase.
Kwon Ju-an, a research fellow at the Korea Construction Policy Research Institute, said, "Next year’s housing market will face heightened risks of a hard landing as demand continues to decline and new supply conditions worsen," adding, "Housing prices will generally face downward pressure, with apartment sale and jeonse prices in the Seoul metropolitan area falling by 3-4%." He further noted, "Housing prices are likely to hit bottom around 2024, with price fluctuations following an L-shaped pattern."
In the subsequent discussion, panelists including Kim Deok-rye, president of the Korean Housing Association; Kim Young-hyun, head of construction policy at the Korea Specialty Contractors Association; Lee Hyun-soo, co-representative of the Construction Industry Vision Forum; and Jang Woo-cheol, director of construction policy at the Ministry of Land, Infrastructure and Transport, shared their evaluations of next year’s construction and housing market outlook and discussed response strategies for construction companies.
Yoo Il-han, acting director of the Korea Construction Policy Research Institute, stated, "2023 is a period of unprecedented uncertainty for both the construction and housing markets, so policy attention and support are urgently needed," adding, "As the construction market slump prolongs and the housing market freezes, the number of marginal companies in the construction industry is likely to increase significantly, making risk management more important than ever."
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