Housing Market Slump Continues in June... "Construction Industry Needs Survival Strategies"

June Housing Business Sentiment Index Trends / Data provided by Housing Industry Research Institute

[Asia Economy Reporter Hwang Seoyul] The housing business outlook for June is expected to worsen compared to last month due to rising interest rates and soaring material prices and labor costs. In a situation where negative factors are intertwined in the construction industry, voices are emerging that a business strategy focused on survival rather than profit maximization is necessary.

According to the "June Housing Business Outlook Index" released on the 23rd by the Housing Industry Research Institute (hereinafter referred to as Jusan-yeon), the nationwide outlook index for this month is 64.1, down 18.5 points from May (82.6). This marks a decline for two consecutive months, following an 18.6-point decrease from the previous month (101.2) last month.

The Housing Business Outlook Index is calculated monthly by surveying housing business operators on their business performance and outlook. It is a supply market indicator that comprehensively assesses the housing business from the supplier's perspective. The survey targets members of the Korea Housing Association and the Korea Housing Construction Association. The index baseline is 100, with below 85 indicating a downturn phase, 85 to less than 115 indicating a stable phase, and 115 or above indicating an upturn phase.

Specifically, the housing business outlook in the Seoul metropolitan area is expected to worsen by 8.9 points this month to 81.6 compared to the previous month (90.5). The provinces are expected to decline by 7.2 points (81.8 → 74.6), with particularly sharp drops in Sejong (78.9) and Chungnam (72.2), which had been optimistic until recently, falling by 21.1 points and 33.6 points respectively.

Despite the overall worsening outlook, Gwangju (84.2 → 86.3), Jeonnam (75.0 → 81.8), Chungbuk (71.4 → 73.3), and Ulsan (75.0 → 80.0) are expected to see improvements in their business conditions. However, compared to June last year, the decline in outlook is -30.3 for Gwangju, -24.8 for Jeonnam, and -26.7 for Chungbuk, indicating a nationwide recession compared to the previous year. In Ulsan’s case, the May outlook reflected a base effect due to a sharp 25.0-point drop from the previous month.

The nationwide material supply index for June is 58.4, and the financing index is 74.0, showing slight increases of 2.3 points and 2.6 points respectively from the previous month. However, Jusan-yeon analyzed, "This is only a slight rise due to expectations for government countermeasures and the significant drop in the previous month's index," adding, "It will be difficult to see a dramatic improvement in material supply due to reduced supply caused by the Ukraine war and global inflation-driven price increases."

Recently, the construction industry has reportedly requested government ministries to reflect the industry's difficulties caused by material supply instability and price surges in policies, proposing ▲temporary realistic market price reflection ▲flexibility in the total project cost system ▲mandatory adjustment of contract amounts for public project price fluctuations.

Jusan-yeon stated, "With negative factors such as rising interest rates, soaring material prices and labor costs, investment contraction, and a short-term downturn in the real estate market all intertwined, the government and industry must seek solutions together," and suggested, "Housing business operators should prioritize business strategies for survival over profit maximization."

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