Construction companies less gloomy

Korea’s construction sentiment rose slightly in October from the previous month, but it remained below the benchmark amid a still slumping property market, a report showed yesterday.

The Construction and Economic Research Institute of Korea (Cerik) said in the report that its construction business survey index stood at 68.5 in October, compared with 62.6 the previous month.

A reading above 100 means optimists outnumber pessimists.

The index rose for the second consecutive month since hitting an 18-month low of 50.1 in August.

The Cerik attributed the index’s slight rise in October to builders’ expectations that the housing market is bottoming out after a set of government measures was announced in late August.

On Aug. 29, Seoul lifted the ceiling on the amount of money people can borrow to buy a home, and moved to delay hikes in registration and acquisition taxes for people who purchase new residences in an effort to revive the housing market.

The DTI ratio serves as a major tool to control housing loans by matching the maximum amount of money people can borrow to their ability to pay it back. The government has kept a tough stance by restricting the DTI ratio to a 40-60 percent range in Seoul and the nearby Gyeonggi region particularly due to the overheated market in the mid-2000s that drove up property prices in the country in general.

There were growing concerns that the stagnant construction market may hurt the economy as project loans that were taken out by construction companies may turn insolvent.

“The index for November is expected to continue to trend higher amid signs of a recovery in the market,” said Lee Hong-il, a Cerik researcher. “However, it is unlikely to near the benchmark 100 due to weak orders and a rise in unsold apartments.”

Yonhap