22 Construction Companies Bankrupt This Year… Highest in 4 Years
‘Malicious Unsold Units’ On The Rise… Liquidity Crisis Intensifies
The construction recession is deepening due to a series of negative factors, including a housing market slump, rising construction material prices, and a liquidity crisis. The construction industry is being pushed to the edge of a cliff, with construction companies struggling with financial difficulties and unable to hold out any longer, going out of business and going bankrupt one after another.
In fact, the number of construction companies that have gone bankrupt this year has reached 22. This is the highest number since 2020. According to the Construction Industry Knowledge Information System, the cumulative number of bankrupt construction companies (construction companies with current account transactions suspended as announced by the Financial Supervisory Service, excluding companies that have closed or been deregistered at the time of the current account transaction suspension) from January to September this year (as of the 7th) is 22. This is the highest number since the same period (January to September) in 2019 (42 companies), and it exceeds the total number of bankrupt companies (21 companies) last year.
By license, the number of insolvent companies was ▲7 comprehensive ▲15 specialized, etc. By region, ▲1 in Seoul ▲2 in Gyeonggi ▲5 in Busan ▲2 in Gwangju ▲1 in Ulsan ▲1 in Gangwon ▲1 in Chungnam ▲1 in Jeollabuk-do ▲2 in Jeollanam-do ▲2 in Gyeongbuk ▲2 in Gyeongnam ▲1 in Jeju, etc.
The number of construction company closures has also increased. The cumulative number of reports of general construction company closures from January to July this year was 295, a 35.32% increase from the same period last year (218 cases). The number of reports of specialized construction company closures during the same period was 1,158, an increase of 1,270 cases.
The construction industry is not shown in statistics, but it is believed that there are quite a few small local construction companies that have suspended operations. A construction industry insider said, “Management difficulties are serious as construction contracts that were previously contracted are being suspended or construction orders themselves are decreasing due to rising construction material prices and wages,” and “However, companies of a certain size use current accounts, so if they go bankrupt, it is confirmed, but it is not easy to confirm if small companies go bankrupt.”
Due to this situation, the number of new registrations has decreased. The cumulative number of new registrations of general construction companies from January to July this year was 274, a 56.08% decrease from the same period last year (624 cases). However, the number of new registrations of specialized construction companies increased from 2,868 cases from January to July last year to 3,101 cases during the same period this year.
The unsold inventory that is not easily resolved is holding back the construction industry. As of July, the number of unsold houses nationwide was 71,822, a decrease of 8 months. However, the number of unsold houses after completion, classified as ‘malicious unsold houses’, is 16,038, increasing for the 12th consecutive month.
According to the ‘July 2024 Housing Statistics’ released by the Ministry of Land, Infrastructure and Transport, the total number of unsold houses nationwide as of the end of July was 71,822, a decrease of 2,215 households (3%) compared to the previous month (74,037 households).
However, the number of unsold units after completion was 16,038, an increase of 1,182 units (8%) from the previous month (14,856 units). Of the total unsold units, 80.2% (57,833 units) are concentrated in local areas. The number of unsold units in the metropolitan area was 13,989, a decrease of 1,062 units (7.1%) from the previous month (15,051 units). The regions with the largest number of unsold units were Gyeonggi-do (11,087 units) and Daegu (10,070 units).
The construction recession is expected to continue for the time being. According to the Korea Construction Industry Research Institute, the ‘Comprehensive Performance Index’ of the Construction Business Survey last month was 69.2, down 3.0%p (points) from the previous month. The ‘Comprehensive Performance Index’ of the Construction Business Survey is an indicator of the economic level perceived by construction companies. If it exceeds the baseline of 100, optimism is considered to be dominant, and if it is below 100, pessimism is considered to be dominant.
Lee Ji-hye, a researcher at the Korea Construction Industry Research Institute, explained, “If we look at the ‘Comprehensive Performance Index’ of the Construction Business Survey by company size, the index for large corporations rose compared to the previous month, while the index for medium-sized and small businesses fell, widening the gap.” She continued, “Both the Seoul and local indices rose, but the gap between the two indices is large.”
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2024-09-15 20:10:33