Impact of Interest Rate Hikes... Decline in Building Permits, Construction Starts, and Completions in Q3

[Asia Economy Reporter Kim Min-young] In the third quarter of this year, the nationwide building permits, construction starts, and completions all decreased simultaneously.

According to the building permit statistics announced by the Ministry of Land, Infrastructure and Transport on the 2nd, the permit area in the third quarter of this year was 38.894 million square meters, down 9.5% compared to the same period last year. This was due to a decrease in permits for neighborhood living facilities and warehouses. The number of permits was 39,812 buildings, a 27.6% decrease from the same period last year.

During the same period, the construction start area was 28.39 million square meters, down 10.6%, and completions were 29.636 million square meters, down 1.2%. Building permits move ahead of economic fluctuations and can predict the economy as a leading indicator, while construction starts move together with economic fluctuations as a coincident indicator. Completions are a lagging indicator that confirms economic fluctuations afterward. The Ministry explained that the simultaneous decrease in all three indicators was due to domestic and international economic influences such as interest rate hikes and global inflation.

By region, the permit area in the Seoul Metropolitan Area was 14.384 million square meters, down 34.0%, but in other regions, it increased by 15.6% to 24.509 million square meters. Permit areas decreased in Seoul (-45.2%), Gyeonggi (-28.6%), Incheon (-55.9%), and Chungnam (-34.7%). On the other hand, permit areas increased in 10 cities and provinces including Busan (117.9%), Ulsan (64.6%), and Gangwon (63.8%).

By usage, commercial and industrial permits all decreased, while only residential permit areas increased by 8.4%. Detached houses (1.458 million square meters → 1.06 million square meters), multi-family houses (642,000 square meters → 317,000 square meters), and multi-unit houses (748,000 square meters → 349,000 square meters) decreased, but apartments in regions such as Busan and Daejeon increased.

Construction start areas decreased both in the Seoul Metropolitan Area (-15.2%) and other regions (-5.9%). The decreases were significant in Sejong (-71.0%), Gwangju (-59.4%), and Jeonnam (-47.4%).

By usage, construction starts for commercial (-19.7%), industrial (-17.7%), and residential (-11.4%) all decreased. Residential construction starts decreased more in the Seoul Metropolitan Area (-13.7%) than in other regions (-9.6%).

Construction starts for educational and social purposes and other uses increased by 6.4% and 4.1%, respectively, influenced by medical facilities. Completion areas increased by 2.5% in the Seoul Metropolitan Area but decreased by 5.2% in other regions. Completions decreased in Sejong (-81.1%), Gyeongbuk (-48.3%), and Jeonbuk (-30.9%). However, residential completions increased by 7.5%, influenced by the rise in apartment completions in regions such as Busan and Chungnam.

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