■ The recent surge in housing construction is more related to banks’ lending attitudes than to the economy. And there is a larger increase in housing supply than demand, unlike in the past.
○ The rapid growth is mostly unrelated to non-housing sectors, and instead, is more connected to the easing of banks’ lending attitudes towards households
following the launch of policy measures aimed at boosting the real estate market.
○ The slight drop in real prices in housing construction, in spite of the sharp increase in construction volume, implies that the recent increase is driven by supply not demand.
■ If slower growth of housing construction appears in the future, firms in the construction industry may suffer from their worsening profitablities. Therefore, financial stability of construction companies should be observed preemptively.
○ Despite enjoying improvements in profitability, construction companies may experience weakening financial stability if faced with adjustments and interest rate hikes.
○ Given that structural adjustments during a declining period is much more costly, construction companies with low profitability and weak financial fundamentals should undergo restructuring in advance.
■ Meanwhile, the recent surge in housing construction on mounting mortgage debt implies that the expected returns are low in production-related sectors. To tackle this issue, efforts are needed to expand growth potential.
○ Increased housing construction on growing housing debt and significantly reduced corporate debt and facilities investment means that funds are rushing into the housing construction sector as a result of the low expected return in production-related sectors.
○ Under the circumstances, for financial resources to flow into productivity -enhancing investments, policy efforts that strengthen the efficiency of the Korean economy, such as restructuring insolvent companies and enhancing labor market flexibility, are needed rather than short-term stimulus packages.