Korea's construction investment to shrink 2.4% next year on high loan costs

Apartment complexes in Seoul [YONHAP]

Korea's construction investment is expected to shrink more than 2 percent in 2024 from this year amid a sluggish economy and rising costs for loans and materials, according to a Korea Research Institute for Construction Policy.

The country's construction investment is projected to reach 257 trillion won ($195 billion) next year, down 2.4 percent from this year, the report said.

For this year, construction investment is forecast to expand 2.2 percent on-year to 263 trillion won.

The outlook comes as construction orders and permits in Korea have fallen on-year for four quarters in a row amid a weak economy.

Other negative factors include a surge in delinquent project financing loans, surging costs and rising prices of construction materials, according to the report.

"The country's construction investment is widely expected to be sluggish next year, with other institutions making more negative projections," Park Seon-koo, a researcher at the institute, said.

It seems inevitable that the country's construction sector may slow down the road before bottoming out sometime between 2024 and 2025, he said, adding that favorable macroeconomic conditions, such as easing inflation, will be crucial for its rebound.

The report also forecast Korean builders' orders to shrink 3.2 percent on-year to 119.2 trillion won next year, with the amount likely to inch up 1 percent to 123 trillion won this year.

BY KIM JU-YEON, YONHAP [kim.juyeon2@joongang.co.kr]