The analysis found that the domestic construction market recession is worse than the 2008 global financial crisis and that recovery conditions are limited.
The Korea Construction Industry Institute (KCI) released a report on the 15th titled 'Recent diagnosis and response measures for the construction market compared to the 2008 financial crisis.'
KCI stated in the report that key real indicators, such as construction orders, building starts, construction performance, and construction investment, have decreased more sharply than during the financial crisis.
Specifically, the construction orders (current), a leading indicator of the construction market in 2023, decreased by 16.6% compared to the previous year, a sharper decline than the 6.1% reduction during the financial crisis in 2008.
The area of building starts also dropped 22.2% in 2008 compared to the previous year, but in 2023, it decreased by 31.7%.
In terms of construction performance (current), a coincident indicator of the construction market, there was growth of 6.6% in 2007, 4.9% in 2008, and 3.2% in 2009 around the past financial crisis. However, recently, there was an increase of 12.4% in 2022 and 10.7% in 2023, but it declined by 3.2% last year.
Construction investment also decreased by 3.5% and 3% in 2022 and 2024, respectively, surpassing the reduction of 2.7% in 2008.
The annual unsold dwellings (as of the end of December) indicator of sluggish housing demand recorded a historical high of 165,599 units in 2008. In 2022, although the unsold quantity was low at 68,107 units, the year-on-year growth rate surged by 284.6%.
KCI assessed that a vicious cycle continues with increasing unsold dwellings and declining corporate revenue. It analyzed that recovery momentum is more limited than in the past due to economic stagnation, difficult financial conditions for rapid interest rate cuts, high construction costs, shrinking housing demand, and limited government response capacity.
KCI pointed out that both short-term stimulus measures and improvements in industrial structure and future response strategies should be promoted together. It emphasized the need for practical and structural policies such as expanding housing supply, regionally tailored responses, and revitalizing private investment.
Lee Ji-hye, a research fellow at KCI, said, 'Even after the 2008 financial crisis, the construction industry found a turning point in recovery with public and private investment intertwined,' but noted that 'currently, due to limitations on policy tools such as interest rates, prices, and finance, recovery is difficult with only short-term responses.'
The research fellow added, 'We must use the current crisis as an opportunity for industrial structural transformation and strengthening competitiveness, and when policy support and industry efforts are combined, the construction industry can leap forward as a driving force for economic recovery.'