Supply Shock Won Hee-ryong: "Timely Reflection of Material Cost Increases to be Prepared by June"

Included in next month's Bunsangje improvement plan
Increase in government procurement material delivery prices
Industry focuses on material discovery and new construction method development

View of apartments from Lotte World Tower Seoul Sky in Songpa-gu, Seoul. Photo by Jinhyung Kang aymsdream@

"We will actively strive to resolve industry difficulties caused by the recent surge in construction material prices and ensure the smooth implementation of the core national agenda of supplying 2.5 million housing units + α."

Amid concerns that the surge in construction material prices may even shrink housing supply, Won Hee-ryong, Minister of Land, Infrastructure and Transport, has begun reviewing related system improvements, such as promptly reflecting the increase in material prices in construction costs. For housing construction projects that have not yet started sales, a plan to reflect the rise in material prices in construction costs will be prepared by June. In addition, while raising the delivery prices of government-procured materials, the construction industry will actively work to reduce construction costs by discovering alternative materials and developing new construction methods.

On the morning of the 30th, the Ministry of Land, Infrastructure and Transport announced that at the M2 Block of the 6-3 Living Zone in Sejong City, a meeting was held chaired by Minister Won Hee-ryong with participation from related ministries, the president of Korea Land and Housing Corporation (LH), heads of four construction and housing-related associations, and construction site officials to discuss countermeasures against the surge in construction material prices. At the construction material supply chain inspection meeting, countermeasures were prepared in four areas: private housing construction, public construction, private construction, and technology development support.

First, regarding private housing construction, reasonable construction cost estimation requirements will be established, and the interest and fee burdens on housing supply project operators will be eased to minimize supply disruptions. In particular, for projects where sales have not yet started, a plan will be prepared to promptly reflect the increase in material prices in construction costs. This will be included in the improvement plan for the price ceiling system scheduled to be announced in June. It is expected to provide a foundation for resuming construction at construction sites nationwide that are experiencing delays due to conflicts over increased construction costs.

For private projects where sales have already been completed and subcontract change contracts have been signed requiring the main contractor to bear more than half of the total increase in construction costs, voluntary subcontract payment adjustments will be induced by easing the operator’s burdens such as fees and loan interest rates. For projects constructing private sale housing with loans from the Housing and Urban Fund, efforts will be made to reduce loan interest rates until repayment after sales.

In the public sector, the Public Procurement Service will promptly reflect price increase factors for each material in delivery prices to ensure timely delivery of government-procured materials. In the private construction sector, a material production and distribution information system will be established. Additionally, for maintenance projects, the Ministry will work with Seoul City to revise the ‘Standard Construction Contract for Maintenance Projects’ to actively adjust contract amounts according to price fluctuations after construction commencement.

Furthermore, the construction industry plans to reduce construction costs by discovering low-cost, high-efficiency alternative materials through independent research and development and developing new construction methods. The government will also actively promote research and development (R&D) such as new construction methods and new construction material development to support private sector efforts to reduce construction costs.

The Ministry of Land, Infrastructure and Transport stated, "Through stable construction material supply via supply chain inspections, cost reduction efforts such as applying new construction methods, appropriate reflection of construction costs, and expanded government support, the cost increase shock will be shared by contractors, clients, and the government," adding, "We plan to minimize construction cost and sale price increases while steadily advancing the supply of 2.5 million housing units + α."

This content was produced with the assistance of AI translation services.