“In the case of re-bidding for design and supervision…. Start of construction, move-in, domino delay”
“Inevitable revision of the order plan in the second half”
“Sluggish construction investment and even supply
concerns ” With the decision to discontinue, it was forced to completely review the ordering plan for the second half of the year. LH President Lee Han-joon said he would make sure that there would be no disruption to the ‘supply of 500,000 units for public sale’, which was originally promised, but the industry sees it as virtually impossible.
According to LH and others on the 21st, the size of the design and supervision contract with the former pipe company that was canceled by this decision is about 65 billion won. Minister of Land, Infrastructure and Transport Won Hee-ryong held an ’emergency meeting related to the LH service cartel’ the day before and decided to suspend all service contracts with the former service companies since the end of July this year.
A total of 11 such cases are worth KRW 64.8 billion. All of these are cases in which a whole building company was selected as a design and supervision service company. Specifically, there were 10 design services (561 cases) and 1 supervision service (8.7 billion won). In addition, 23 design and supervision services (KRW 89.2 billion) are under bidding and review, and announcements for these will also be canceled. An LH official said, “The current construction order has메이저사이트 not been completely suspended. We have not yet finalized the order plan for the second half of the year,” he explained.
However, it is a common voice in the industry that disruptions are inevitable in the supply plan for public apartments. LH announced on the 19th of last month that it would place orders for construction and services worth a total of 8.2 trillion won in the second half of this year. Of this, the construction sector is worth 7.7 trillion won and the service sector is worth 500 billion won. Of course, the size of the design and supervision service, which needs to be re-announced immediately, is only 3% of the total order amount, which is 150 billion won. However, if the design and supervision are re-bidding from the origin, the possibility that the construction bidding for the project will eventually be delayed is obvious.
An official from a large construction company said, “It will take quite a bit of time to review and select the design and supervision services again,” adding, “It is natural that the start of construction and move-in are delayed like dominoes rather than scheduled.”
This situation is expected to have an impact on the housing supply plan of the Yoon Seok-yeol government. President Yoon decided to supply 500,000 public housing units by 2028, of which 63% (316,000 units) must be supplied by LH. Immediately, in the first half of this year (January to June), only 1713 public housing units were started, a 73% decrease compared to the same period last year (6362 units). At a press conference held the day before, President Lee said, “We will bring forward the delayed project so that there is no problem with overall supply,” but the possibility of realization is not high.
If LH’s supply is disrupted, sluggish construction investment will be unavoidable. In the “Economic Trends in the Second Half of 2023” announced last month, the government predicted that construction investment would increase by 0.6% this year. The annual economic growth rate for this year was also presented at 1.4%. It was premised that the slump in the construction market would improve, such as the resumption of delayed construction, but forecasts are highly likely to diverge in the public sector.
In addition, housing permits and construction starts are also decreasing due to rising raw material and labor costs, so there is a high possibility that not only the public sector but also the private sector will deteriorate compared to the forecast. According to the Ministry of Land, Infrastructure and Transport, the number of housing permits and permits in the first half of this year was 189,213, a decrease of 27.2% compared to the same period last year (259,759). During the same period, the number of housing starts nationwide was 92,490, down 50.9% from a year ago (188,449).
Yeo Kyung-hee, senior researcher at Real Estate R114, pointed out that “private sales are showing a decline due to the risk of unsold sales and poor business feasibility.” did.