With a drop of 51.5% from a year in the commencement rate of construction works in the first half of the year 

Apartment house constructors are reluctant to start the construction of houses due to a slump in housing business even in case they have already obtained an approval from the government for the house construction works.
 
According to a recent report by the Ministry of Land, Transport and Marine Affairs, the land where construction works of apartment houses commenced in the first half of the year posted 7.98 million sq. meters, down 51.5% from the year-earlier period’s 16.44 million sq. meters.

Such severe shrinkage of the land, where construction of apartment houses started, in the first half of the year compared with a year ago resulted from that fact that the number of construction permits obtained at the end of last year and the beginning of this year dropped to a large extent and a large number of constructors are postponing the commencement of their apartment construction works, even in case that they received approval for the construction works, due to the delay in a recovery of housing market.

In the first half of last year, a total of 19.21 million sq. meters were approved for the construction works of the houses, and the size of the land where construction works commenced stood at 16.44 million sq. meters, or 85.6% of the land allowed for the construction works. However, the commencement rate of construction works dropped to 50.4% in the first half of this year, indicating the fact that constructors are delaying the commencement of their construction works.

What is worse, the cash flow of the apartment-building industry has become worse at a fast pace, because a lot of mid-size constructors have been driven to the risk of bankruptcy as they are holding a large number of houses that remain unsold even after the completion of their construction works.

Such delay in the commencement of construction works for new apartment houses is feared to bring about the supply shortage of houses after a couple of years when the related construction works were supposed to finish.

Moreover, a drop in the supply of houses is expected to cause the shrinkage of demand for steel products, working as a maleficent factor of a business cycle.

Meanwhile, there is a broad possibility that such a decrease pace of the land, where constructors will break ground for the construction of houses, will continue throughout the second half of the year. The total size of the land that obtained approvals for the construction of houses decreased 24.6% from 6 months ago and dropped 17.6% from a year ago in the first half of this year, and analysts say that it is difficult to expect any recovery of apartment-building industry this year, as each constructor is expected to maintain its conservative management policy, unless real estate business becomes brisk.
bjh@snmnews.com