Recently, 'zero energy' has been a hot topic in the field departments of construction companies. Starting in June, when the 'zero energy' certification system is introduced for private apartments, construction costs are expected to increase significantly following rising material prices.
According to the Ministry of Land, Infrastructure and Transport and the construction industry on the 28th, starting in June, zero energy Grade 5 certification will become mandatory for the construction of multi-family housing with 30 units or more. To obtain zero energy Grade 5 certification, one must meet criteria such as ▲ energy efficiency certification of grade 1++ or higher ▲ energy independence rate of 20% or more but less than 40% ▲ installation of a Building Energy Management System (BEMS). Construction companies are required to introduce high-performance windows, insulation materials, and photovoltaic systems when building apartments.
Inside construction companies, there is a busy atmosphere in preparation for the zero energy certification system. Despite several issues looming, such as an industry recession and a tightening funding market, the zero energy certification system is seen as a factor that will immediately push up construction costs. The Ministry of Land, Infrastructure and Transport estimates that the increase in construction costs resulting from the mandatory zero energy certification will be around 1.3 million won for a standard 84 square meter unit. The Ministry explains that energy costs will be reduced by 220,000 won per household due to the zero energy certification, allowing construction costs to be recouped in about 5.7 years.
However, the opinions of construction companies that actually build apartments are different. They anticipate that costs will rise by over 3 million won based on the standard 84 square meter unit. Amid rising construction costs, disputes are arising everywhere, and construction companies feel the situation is exacerbated. On the same day, the Ministry disclosed that the standard construction cost for existing basic-type buildings (16 to 25 stories, 60 to 85 square meters of usable space) will be 2.14 million won per square meter, reflecting a 1.61% increase compared to six months ago. This increase includes indirect construction costs and labor costs.
A representative from a large construction company noted, "Last year, the key focus in the design institutional sector was new business, but this year it has shifted to 'zero energy.' I expect that the introduction of the zero energy certification system will increase construction costs by about 10%."
Another representative from a large construction company stated, "As the trend of high-rise apartments increases, it becomes very difficult to secure the area for solar panel installation, leading to a high likelihood of increased additional construction costs."
Large construction companies are already in a situation where their cost of goods sold ratio exceeds an average of 90%, worrying about additional construction cost increases. The cost of goods sold ratio ranged from 85% to 87% between 2017 and 2020, but since last year, it has surpassed an average of 90% for top-ranked construction companies based on construction capability assessments. For Hyundai E&C and Kumho Engineering & Construction, their cost of goods sold ratios last year were 100.6% and 104.9%, respectively, indicating that they spent more on costs than their revenue.
A senior official in the construction industry acknowledged, "While the zero energy certification is a system that needs to be implemented eventually in line with the trends of the times, the current situation in the construction industry is at its worst since the International Monetary Fund (IMF) bailout crisis, and there are concerns that the selling prices of the apartments currently supplied will rise further or that construction cost conflicts will deepen."
Park Cheol-han of the Korea Construction Industry Institute stated, "It is true that the timing is not right to introduce zero energy certification, and it is also necessary for the government to facilitate smooth agreements so that the contracting parties can accept the increased construction costs well."