South Korea construction sector faces rising costs and declining orders

The South Korean construction industry is grappling with dual pressures of escalating costs and a sharp decline in new orders. In urban redevelopment and reconstruction projects, rising raw material and labor costs have led to frequent disputes between developers and contractors. In Seoul, 75 such disputes were recorded between 2022 and September 2024, with settled agreements showing an average construction cost increase of 38.2%.

Simultaneously, regional economies, particularly in Daegu, are experiencing a significant downturn. A survey by the Daegu Chamber of Commerce revealed that 71.6% of local construction firms reported deteriorating business conditions, with 75% noting a decrease in orders. In September, Daegu's construction orders plummeted by 79.6% compared to the previous year.

This contraction is creating a domino effect across related industries. The decline in construction activity has led to a reduction in the number of hardware stores and real estate agencies, as local businesses struggle with the lack of new projects and stagnant property transactions. Experts warn that prolonged stagnation could extend risks to the broader financial sector.