Construction Business Sentiment Improves Due to Seasonal Factors... "Decline Expected Again in January" [Real Estate AtoZ]

It was confirmed that the business sentiment index felt by construction companies rose in December last year.

The Korea Research Institute for Construction Policy (KRICP) announced on January 14 that the Construction Business Survey Index (CBSI) for December last year was tallied at 77.2, up 5.0 points from the previous month. If the index is below the baseline of 100, it means more companies have a pessimistic view of the construction market; if it is above 100, an optimistic outlook prevails.

The KRICP explained that this increase is considered a temporary rebound due to seasonal factors such as a rise in orders at the end of the year.

Looking at the detailed indices by sector, the new order index rose by 3.7 points to 73.4. The order backlog index also increased by 6.2 points to 81.6. The financing index and the material supply index rose by 1.5 points and 0.5 points, respectively. On the other hand, the construction progress index fell by 3.4 points to 89.3, indicating that the on-site perception of a real economic recovery remains insufficient.

By construction type, the new order index for civil engineering rose by 4.9 points to 66.9, while housing increased by 1.2 points to 75.9. Non-residential buildings also rose by 3.9 points to 74.5.

By company size, the large company index rose by 7.2 points, while the mid-sized and small company indices increased by 2.7 points and 5.2 points, respectively. The Seoul index and the regional index rose by 2.7 points and 3.9 points, respectively.

However, the comprehensive outlook index for January this year is projected to decline again to 63.5. Lee Jihye, a research fellow at KRICP, stated, "While the order indicators show a limited recovery trend centered on private housing, the continued sluggishness in public orders and the ongoing downturn in the civil engineering sector will restrict the pace of recovery in real indicators such as construction progress and employment for the time being. Business sentiment is also likely to slow again after the year-end rebound."

Meanwhile, construction orders in November last year amounted to 21.4 trillion won, a decrease of 6.8% compared to the same month the previous year. However, this figure is 3 trillion won higher than the average over the past three years, indicating an ongoing recovery trend centered on private housing.

Public orders were 7.7 trillion won, down 26.8% from the same month the previous year, while private orders increased by 10.1% during the same period to 13.7 trillion won.

In contrast, construction progress-a coincident indicator of the construction market-decreased by 15.6% year-on-year to 11.6 trillion won, marking the 19th consecutive month of decline. This is attributed to a cumulative decrease in construction starts, prolonged construction periods due to high interest rates, stricter permitting and safety regulations, and increased on-site operational risks.

In November last year, the number of construction industry employees fell by 6.3% year-on-year to 196,000, marking the 19th consecutive month of decline.