[Initial Moment] The Construction Site Where the Sound of Hammers Stopped

[Asia Economy Reporter Cha Wanyong] "There are no construction sites to send workers to." This was a sigh from the head of a manpower office I recently met. He said the construction market he feels on-site is the worst. In over 30 years of running a manpower office, he has never seen such a rapid decrease in construction sites.

After hearing this, I paid close attention to the sounds inside the safety fences at construction sites whenever I visited. There was definitely a difference. During the housing construction boom in 2020-2021, when I visited sites in Yeongdeungpo, Cheongnyangni, and Susaek in Seoul, the noisy hammering (construction) sounds could be heard everywhere, but now they are barely audible. The few construction sites visible were mostly those that had started quite some time ago, having completed the framework and were in the process of raising the floor height.

What do the statistics show? According to the Ministry of Land, Infrastructure and Transport's nationwide housing start data, as of the end of December last year, there was a sharp 34.3% decrease compared to the previous year. The metropolitan area recorded 186,408 households, down 37.9% year-on-year, and the provinces had 196,996 households, down 30.5%. Considering that January and February this year are characterized by a market panic due to a surge in unsold units and the construction off-season, the number of housing starts likely shrank even further.

Industry insiders in development and construction say that sites delaying groundbreaking are those still with some financial leeway. Real estate projects with blocked cash flow due to steep declines in property prices and unsold units are being transferred through auctions. According to the Korea Construction Association, as of the end of last year, there were at least 32 project financing (PF) sites nationwide where construction was delayed or projects were halted due to severe liquidity shortages.

The survey covered 231 PF projects involving association member companies, but with a response rate of only about 10%, the actual number of delayed or halted sites is likely much higher. Recently, even large construction companies have withdrawn from projects mid-way, such as residential-commercial complexes in the Ulsan area.

Not only has the volume of groundbreaking decreased, but public housing sites for apartment construction are also not being traded. Developers and construction companies are giving up future projects due to high interest rates and raw material cost pressures. This is quite different from last year, when competition rates reached dozens to one.

According to Korea Land and Housing Corporation (LH), out of eight residential land parcels put up for sale with bidding announcements in December last year, only two parcels (Incheon Geomdan and Gyeongbuk Chilgok Buksam district apartment sites) were sold. Six parcels, including two residential-commercial complex sites in Namyangju Jinjeop 2, Gunpo Daeyami residential-commercial complex site, and apartment sites in Guri Galmae Station area and Gimpo Hangang New Town, all promising metropolitan area sites, failed to attract applicants and were auctioned off. Less than 75% of the total was sold.

Although the real estate market downturn is not a new issue, a more than 34% drop in groundbreaking and unsold project sites is a serious problem. The construction industry accounts for about 5% of the entire Korean economy and has significant forward and backward linkage effects. A reduction in construction sites could become a trigger for a nationwide economic crisis. Moreover, from a long-term perspective, housing supply and demand in regions will also be affected. Urgent and extraordinary measures are needed to ensure construction sites can operate properly before it is too late.

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