In the first quarter of this year (January to March), the number of registrations, cancellations, closures, and bankruptcies among construction corporations has decreased. Cancellations and closures dropped by nearly 20% compared to the previous quarter, and the number of bankrupt corporations also decreased to half of that in the previous quarter. This is interpreted as the construction industry moving past its worst period and gradually entering a recovery phase. However, with the implementation of the debt service ratio (DSR) phase 3 starting in the second half of the year, it remains to be seen whether the recovery of the construction industry will continue for a long time.
According to the Construction Industry Information Center, the number of cancellations and closures of construction companies in the first quarter totaled 747. This figure represents a decrease of 18.4% (168 companies) compared to the previous quarter, which was the fourth quarter of 2024 (October to December). By scale, the number of cancellations and closures of general construction corporations decreased by 43 compared to the previous quarter, while the scale of cancellations and closures among specialized construction corporations decreased by 125.
Examining the cancellations and closures among construction corporations by scale in the first quarter, general construction corporations accounted for 221 (29.5%) and specialized construction corporations accounted for 526 (70.4%). Seven out of ten construction companies that underwent cancellations and closures operate solely in specific fields as specialized construction corporations.
The most common reason for cancellations and closures was voluntary closure, with 524 companies (70.1%) choosing this option. This was followed by registration cancellations (164 companies, 22.0%) and comprehensive transfers and mergers (59 companies, 7.9%).
The number of construction companies that went bankrupt also decreased. In the first quarter, the number of bankrupt firms was four, more than halving from nine in the first quarter of 2024. Two general construction corporations and two specialized construction corporations were declared bankrupt.
In the construction industry, there was hope that the business environment would improve gradually this year. However, experts note that it is still too early to conclude that the business environment has completely recovered.
Lee Eun-hyung, a research fellow at the Korea Construction Policy Research Institute, said, "Although the situation for construction corporations has improved slightly compared to last year, it is still too early to talk about a business environment improvement." The Korea Development Institute (KDI) also diagnosed in its 'June Economic Trends' report released on the 10th that "recently, our economy is in a weak state, with the construction industry struggling and exports slowing due to U.S. tariff increases."
Particularly, the impacts of the implementation of the debt service ratio (DSR) phase 3, which will start in the second half of the year, may affect the entire real estate market, including the housing market. According to a survey by the Housing Industry Research Institute, the housing supply outlook index for June in Seoul plummeted by 18.5 points compared to the previous month. Analysts suggest that the increase in the volume of projects wanting to conclude offering this month due to the implementation of the stress DSR phase 3 starting in July contributed to the index decline.