The construction sector - the only sector with activity in Korean domestic demand - is rapidly cooling amid toughened government regulations and clampdown on the real estate market with business sentiment hitting four-year lows.
According to the Construction and Economy Research Institute of Korea on Sunday, the construction business survey index (CBSI) stood at 67.9 in September, far below the confidence threshold of 100. It was the first time for the index to remain below 70 for two consecutive months since February to March in 2014.
A reading below 100 means pessimism overwhelms optimism on the business outlook, and a number above the opposite.
The index hit a 55-month low of 67.3 in August and improved 0.6 point in September - a typical peak season for the industry. A strong package of tougher taxes and regulations on multiple homeowners released on Sept. 13 has led to souring in the business sentiment, the institute said. The government proposed it would double the property tax on multiple homeowners in speculative areas and restrict them from taking out mortgage loans.
The business sentiment of large builders came at 75 last month, down 6.8 points from the previous month. It was the lowest figure since August 2017 when it stood at 64.3. “Normally, the index increases 3 to 9 points on month in September because of the high seasonal demand, but this September showed just a 0.6-point on-month rise,” said a researcher from the institute. “The figure hovering below 70 for two months in a row means that the construction industry is in the worst downturn in four years.”
By Sohn Dong-woo and Choi Mira
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