Building industry faces downturn

Korea’s construction industry, which showed a slight recovery earlier this year, may face a severe downturn for the rest of this year as government budgets dry up after heavy spending on state-led construction projects and private sector builders fell off after new industry restrictions took effect, a local think tank said.
Hyundai Economic Research Institute, a Seoul-based think tank, predicted in a report yesterday the nation’s construction industry, which shrank by 0.1 percent in 2006, is likely to continue its downward momentum for the rest of this year.
“Private sector construction activities will dramatically worsen after September since the government’s new restrictions designed to curb property price hikes will increasingly take effect,” the institute said in a report.
The government’s rapid spending on state-led construction projects will lead to relatively fewer projects in the latter half of this year, further chilling the domestic market, the report said.
Korea’s construction production climbed 1.4 percent in the first quarter of this year but slid by 1.8 percent in the second quarter.
Despite the worsening business environment, the number of local lenders remained nearly unchanged, further fanning market competition and eroding builders’ overall profitability.
The think tank advised the government to take advantage of the upcoming South-North presidential summit to forge more projects to build new infrastructure in North Korea, while bailing out more small builders with little market competitiveness.

By Jung Ha-won Staff Writer [hawon@joongang.co.kr]