"My Job is Gone"... Disappearing Sites, Worst Construction Investment

[Financial News] The construction industry, which has a significant ripple effect on related industries, is experiencing an unusual recession. Not only construction investment but also the construction start area (including residential and non-residential) that directly affects other industries recorded the second lowest performance in history in the first quarter of this year since the related statistics were released. There are even concerns that the construction industry's recession could prolong the period of eroding the country's GDP.
On the 29th, Financial News analyzed the construction start area statistics from the Ministry of Land, Infrastructure and Transport, revealing that the nationwide construction start area in the first quarter was 15.116 million square meters.
This is a 29.8% decrease compared to the same period last year (21.542 million square meters), marking the lowest performance since the first quarter of 2009 (12.744 million square meters) during the financial crisis. The Ministry's construction start area statistics have been provided quarterly since the first quarter of 2004.
The significant reduction in construction investment is due to the unprecedentedly poor figures in construction start areas. Specifically, last year's nationwide construction start performance was 89.776 million square meters. Although it slightly increased compared to 2023 (75.678 million square meters), it fell below 100 million square meters for two consecutive years. The drop below 100 million square meters in construction start area is the first since 2012.
Construction starts are sequentially reflected in construction investment over an average of 1 year and 9 months to 2 years. The reason construction investment has not recovered is largely due to the significant decrease in construction start performance in 2023 and 2024.
Park Cheol-hwan, a research fellow at the Korea Construction Industry Research Institute, said, "The construction start area has significantly decreased for two consecutive years, negatively impacting the current growth rate." This is why construction investment in the first quarter decreased the most since the foreign exchange crisis.
The problem is that the recession may continue further. Even considering political uncertainties, the construction start area in the first quarter (15.116 million square meters) is concerning. Park noted, "Even considering political uncertainties, the figures from January to March this year were much worse than initially expected."
The contraction in the construction industry is also negatively affecting GDP.
Firstly, the real economic growth rate of the construction industry has been on a negative streak for four consecutive quarters from the second quarter of 2024 to the first quarter of this year. The contribution to economic growth is also problematic. It recorded 0.0% in 2022, 0.2% in 2023, -0.2% in 2024, and -0.5% in the first quarter of this year. The main culprit dragging down the growth rate is the construction industry.
The number of construction industry employees is also rapidly declining. According to the industry, construction sites have decreased by about 20-30%. The decline has continued for 11 consecutive months from May last year to March this year. As of March this year, the number of construction industry employees was 1.93 million, a decrease of 8.7% compared to the same month last year.





ljb@fnnews.com Lee Jong-bae Reporter