2023-06-29 10:11:25
[정보통신신문=이민규기자]
This year, construction orders, a leading indicator of the construction market, continue to decline, but construction completion and construction investment, a coincident indicator, are showing an increasing trend. Such conflicting aspects are becoming a factor that causes confusion in the construction market.
In response, the Korea Institute of Construction Industry (Keonsan Research Institute) held the ‘Construction and Real Estate Economy Forecast Seminar in the Second Half of 2023’ at the Construction Hall in Nonhyeon-dong, Seoul on the 26th of last month and diagnosed the recent trends in the construction market and current issues. On this day, the Kunsan Research Institute drew attention by presenting specific forecasts for construction orders and investment.
■ Rapid increase in unsold homes in the first half
According to the analysis of the Kunsan Research Institute, construction orders in the public sector in the first half of this year are showing a very sluggish trend. It is interpreted as a result of a decrease in spending due to a decrease in the SOC budget and a lack of government tax revenue. In the second half of the year, thanks to an increase in large-scale construction orders, public sector construction orders are expected to be better than in the first half.
In the first half of the year, construction orders in the private sector showed the same sluggish pattern as in the public sector. The significant increase in the number of unsold housing units was a key factor in the slump in private construction orders. The KRI predicted that the sluggishness in construction orders would ease somewhat in the second half of the year, but the overall trend of decline would continue.
In this trend, domestic construction orders this year are expected to reach 200.1 trillion won, down 12.9% from last year. In the second half of the year, construction orders are expected to reach 105.6 trillion won, down 6.6 percent from the same period last year.
Dividing the public and private sectors, the amount of construction orders received in the public sector this year is expected to decrease by 4.2% year-on-year, while private orders are expected to decrease by 15.8%. By type of work, the amount of civil engineering-related orders decreased by 0.6% compared to the same period last year, and the amount of orders received for residential and non-residential construction decreased by 17.9% and 16.9%, respectively, which is expected to lead to a slump in overall construction orders.
A construction order is established as a bilateral contract in which a construction company agrees to complete a construction object proposed by the owner. The amount of construction orders is calculated with figures for the construction amount and delivery date.
Construction orders are used as a leading indicator to measure the construction market as they come before actual construction. A leading indicator is a number that moves ahead of the actual movement among various statistical data that indicate the trend of the economy. Stock prices, production indexes, and wholesale price indexes are leading indicators.
While construction orders are expected to decrease this year, construction investment is expected to increase slightly compared to last year. The Institute of Construction Industry predicted that construction investment this year would reach 259.5 trillion won, up 0.7 percent from the previous year.
First of all, in the first half of the year, many construction projects are about to be completed, so construction investment is expected to increase by 1.8% compared to the same period last year. However, construction investment growth is expected to gradually slow in the second half of the year when completed projects increase. The KIC projected that the amount of investment in the second half of the year would reach 134.68 trillion won, down 0.2 percent from the same period last year.
■ The need for a multifaceted stimulus package
Construction investment refers to the sum of money spent on obtaining completed buildings or structures during a given period. This is used as estimated statistics belonging to the expenditure category among the national accounts prepared by the Bank of Korea.
Construction investment has an important meaning as a companion indicator for diagnosing the construction market along with construction completion. A coincident indicator is a series of statistics that show the current trend of economic activity. Gross national product, industrial production, and personal income are examples of coincident indicators.
The construction completion rate refers to the construction cost for the part in which construction is actually progressed after the contract is signed. The construction cost, which is divided by period according to the progress rate, is the construction completion amount.
At the seminar, Park Chul-han, a researcher at the Korea Institute of Industrial Science and Technology, who presented the outlook for the construction market in the second half of the year, presented tasks to respond to recent changes in the construction market from the perspective of economic policy and construction companies. He said that the conditions for the recovery of the construction industry should be created in terms of economic policy first.
As for the tasks to recover the construction industry, △stabilization of material prices △realization of construction costs △recovery of housing transactions △stabilization of the financial market was cited. In particular, Commissioner Park emphasized that it is urgent to realize construction costs in order to minimize large-scale failed bids.
Along with this, Commissioner Park presented the opinion that it is necessary to prepare an economic stimulus plan from the economic point of view. It is pointed out that practical preparations must be made to revive the economy, such as securing SOC budgets, facilitating large-scale public civil engineering projects, strengthening support for private projects, and preemptively introducing financial resources.
In terms of construction companies, establishing emergency strategies and strengthening financial stability were cited as key tasks. First of all, as part of establishing an emergency strategy, it was announced that unsold business sites should be cleared and short- and mid-term response strategies should be established. In addition, it ordered to secure cash flow and revise or supplement existing business portfolios to strengthen financial stability.
■ Anticipation of economic improvement amid negative outlook
The trend of construction orders and construction investment directly and indirectly affects the economic diagnosis of specialized facilities such as information and communication construction projects. This is because most of the orders for information and communication construction are related to construction work orders.
General information and communication construction companies appear to have expectations that business conditions will improve in the future, even though they complain of business difficulties due to the recent shortage of construction supplies.
In April, the results of the ‘Information and Communications Construction Industry Survey (BSI) Survey’ announced by the Korea Information and Communications Industry Research Institute together with the Korea Information and Communications Construction Association support this diagnosis. According to the results of the survey, the second quarter information and communication corporation’s business survey index (BSI) was ‘56.4’. This is an increase of 11.8 points from the first quarter.
The Business Survey Index (BSI) is a numerical representation of the company’s on-site business performance. A score below 100 indicates that there are more companies with a pessimistic view of the economic situation than companies with an optimistic view of the economy, and a score above 100 indicates the opposite.
The fact that the BSI for the second quarter information and communication construction company was 56.4, which is far from the standard value of 100, is proof that most of the information and communication construction companies have a negative outlook on the economy of the information and communication construction business. However, the fact that the figure has increased compared to the first quarter can be said to contain expectations that the future economy can improve.
320 information and communication construction companies nationwide participated in this BSI survey. About a quarter of the responding companies cited order-receiving activities (25.1%), rising labor costs (24.2%), and manpower supply and demand (13.7%) as difficulties in managing the information and communications construction business. In addition, △financing (11.0%) △increase in material prices (10.5%) △intensified competition in the industry (7.8%) △domestic economic situation (4.1%) △weakening technological competitiveness (0.5%) pointed to
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