[Sisibibi] Missing Livelihood in Real Estate Audit, As Expected

Yangpyeong Expressway and Statistical Manipulation Dispute
No Solution in Sight for Real Estate Market Downturn

It was as expected, though there was a slight hope otherwise. The biggest issues in the ruling and opposition parties' heated debate at the Land, Infrastructure and Transport Committee during the final National Assembly inspection of the 21st National Assembly were, as anticipated, the Yangpyeong Expressway and statistical manipulation. The ruling party questioned the alleged manipulation of real estate statistics during the Moon Jae-in administration, while the opposition party focused on probing the preferential treatment suspicions involving First Lady Kim Keon-hee’s family, which arose due to changes in the preliminary feasibility study and the route near the terminus of the Seoul?Yangpyeong Expressway. Fierce exchanges between the parties saw lawmakers arguing over whether it was political strife or not, and there were scenes pointing out the minister’s uncooperative attitude.

On the other hand, there was no constructive voice diagnosing the government’s construction and real estate policies or seeking better directions, despite the fact that the real economy has already shown red flags. Both the nationwide apartment occupancy rate in September and the October occupancy outlook index declined simultaneously. Even Seoul, once considered ‘unbeatable in subscription,’ is experiencing an unusual trend with a flood of uncontracted units. Concerns about future supply-demand imbalances are growing due to the already shrinking housing supply permits and construction starts. Although the government announced the ‘Housing Supply Activation Plan’ last month, there is no immediate impact visible in the market, and some even say the content itself lacks tangible measures. This only underscores how severe the economic situation caused by the real estate slump is.

As a result, the profitability and stability of the domestic construction industry, which has been hit hard by the real estate downturn, are on a downward trajectory. According to the Bank of Korea’s Corporate Management Analysis report, the operating profit margin and pre-tax net profit margin of the construction industry were 3.3% and 3.4%, respectively, in the second quarter of this year, down by half compared to a year ago (6.5% and 7.3%). Particularly, while stability indicators improved across all industries, the construction sector moved in the opposite direction. The debt ratio of the construction industry increased from 135.6% in the second quarter of last year to 150.3% in the second quarter of this year.

Given this situation, as many as 2,700 general and specialized construction companies closed their doors this year alone. The outlook for next year is not bright either. The Korea Construction Policy Research Institute recently analyzed in a report that “construction industry downturn is expected to deepen in the second half of the year and is likely to continue into next year.”

It is not only domestic orders that are problematic but also overseas contracts. The outbreak of war between Israel and the Palestinian armed group Hamas inevitably disrupts orders in the Middle East, a stronghold for domestic construction companies. One-third of the overseas orders of the top 10 domestic construction companies this year come from the Middle East region.

People often say the most interesting spectacles in the world are watching fires and fights. However, repetitive verbal battles over the same topics, like a broken record, have become tiresome. With the general election scheduled for April next year, both ruling and opposition parties may appear to be engaged only in a fierce struggle to expose the faults of the current and previous administrations. Meanwhile, the livelihood of the people is left behind amid the construction and real estate downturn.

Of course, it is necessary to judge the right and wrong of past events. But is it too much to hope that more effort would be put into recognizing the imminent real estate real economy crisis and focusing on policy verification and solution seeking? No matter how close the April general election is. We only hope that this realization does not come too late.

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