South Korea’s construction industry is showing signs of severe stress across all major indicators. (Image courtesy of Yonhap)
SEOUL, March 3 (Korea Bizwire) — South Korea’s construction industry is showing signs of severe stress across all major indicators, with permits, groundbreakings, and employment all deteriorating amid a persistent market slump that analysts warn will require fundamental strategic shifts to overcome.
Construction permits, a leading indicator of industry health, fell 6.8% year-over-year to 125.89 million square meters in 2024, according to the “2025 Construction Market Outlook” released March 2 by Park Sun-gu, head of economics and finance at the Korea Research Institute for Construction Policy. This marks the second consecutive annual decline, following a 25.6% drop in 2023, with last year’s figure reaching only 78.2% of the 10-year average of 160.89 million square meters.
Actual construction starts painted an even bleaker picture, with groundbreakings covering just 79.31 million square meters – only 63% of permitted area and 67.2% of the 10-year average of 118 million square meters. This represents the third straight year below historical averages since 2022.
While construction orders rose nominally by 1.5% to 209.8 trillion won in 2024 from 206.7 trillion won the previous year, Park noted this merely reflects a base effect following sharp previous declines, with real growth effectively at zero. Orders had grown for four consecutive years from 154.5 trillion won in 2018 to 248.4 trillion won in 2022 before plunging 17.4% in 2023.
Construction investment fell 2.7% to 297.8 trillion won, hitting its lowest level since 2015′s 274 trillion won. Employment in the sector dropped 2.3% to 2.07 million workers in 2024, accelerating from a 0.4% decline the previous year. January 2025 saw employment fall further to 1.92 million – down 169,000 from a year earlier and dipping below 2 million for the first time since February 2021 during the pandemic.
Financial indicators show mounting stress. Among large construction firms subject to external audits, outstanding receivables jumped 21.3% to 32.5 trillion won in 2023, marking eight straight years of increases since 2015′s 16.6 trillion won. Nearly half (47.5%) of these firms had interest coverage ratios below 1, meaning they couldn’t cover interest payments with operating profits. The industry’s average operating profit margin of 3% in the second quarter of last year was less than half the overall industrial average of 6.2%.
The industry’s struggles have already claimed casualties, with 641 general contractors filing for closure in 2024 – the highest number since 2005. This year has seen at least four construction companies, including DongAh Construction, Sambu Construction, Daejeo Construction, and Ankang Construction seeking court protection.
“There are significant concerns about bankruptcy risks among small and medium-sized construction companies, particularly in regional areas, due to increasing construction costs, deteriorating funding conditions, and economic slowdown,” Park said. “Construction industry weakness appears inevitable through 2025 given the sharp drop in groundbreakings in 2022 and 2023.”
“Long-term construction investment is likely to lag overall economic growth,” he added. “Given negative factors including demographic changes, regional decline, and industry conditions, companies need to develop new survival strategies rather than expecting a return to past growth patterns.”
M. H. Lee (mhlee@koreabizwire.com)
