The government has poured a 2.7 trillion won budget this year to boost the construction economy, but an analysis found that construction investment growth will average only 0.2% over the next four years. Construction investment is expected to increase by more than 3% next year, but the growth rate is projected to fall again starting in 2027. Analysts said it will take more time for government support and large-scale dwellings supply plans to translate into a recovery in the construction economy.
According to the 2026 NABO economic outlook: 2025–2029 by the National Assembly Budget Office on the 21st, construction investment is expected to increase by an average of 0.2% annually from this year through 2029. By year, the Budget Office analyzed that this year's construction investment will fall 8.2% from last year. That is a 0.1 percentage point (p) smaller decline than the projection (-8.3%) released by the Bank of Korea in Aug., but a larger drop than the Korea Development Institute (KDI) projection (-8.1%) from the same month.
The Budget Office estimated that next year's construction investment will increase 3.2% from this year. That is 0.6 percentage points lower than the BOK estimate (+3.8%) and 0.6 percentage points higher than the KDI estimate (+2.6%).
While a construction investment growth rate of more than 3% is projected for next year, the rate will decline again starting in 2027. The Budget Office projected that from 2027 to 2029, construction investment will increase only 2.0% each year compared with the previous year. From this year through 2029, the average annual construction investment growth rate is 0.2%.
The Budget Office said, "As projects from improved orders in 2023–2024 continue, the slump will gradually ease," adding, "The slow rise in construction material expense is expected to act as an upside factor for construction investment." It also noted, "The recent increase in the government's construction investment-related budget bill submitted to the National Assembly is expected to help improve the weakness in construction investment." However, it analyzed that accumulated unsold dwellings after completion, mainly in nonmetropolitan areas, and a decrease in dwellings move-ins in 2026 will act as constraints on construction investment.
The government is injecting budget funds to help the construction economy recover. Of the 30.5 trillion won supplementary budget finalized in two rounds through Jul., 2.7 trillion won was allocated as a budget to stimulate the construction economy. It also announced a plan to supply a total of 1.35 million new dwellings in Seoul and the greater capital area over the next five years, or an annual average of 270,000 dwellings.
However, many expect that such budget injections and dwellings supply will not quickly translate into a recovery in the construction economy. That is because the private institutional sector has a larger share than the public sector led by the government, and policies such as dwellings supply take a long time to be reflected in construction investment. According to the BOK, in domestic construction investment, the private institutional sector accounts for about 78% and the government sector for 22% (as of 2024).
Seol Kyung-won, economic analyst at the Budget Office, said, "The increase in construction investment next year reflects a base effect from this year, when construction investment fell sharply from last year," adding, "It is hard to say the construction economy will be fully recovered even after next year." Seol added, "The government's capital area dwellings supply plan has been announced, but it will take time for it to be reflected in construction investment."
Lee Eun-hyung, research fellow at the Construction Economy Research Institute of Korea, said, "For construction investment to grow, demand in the market must increase in the private institutional sector, which has an absolutely large share, but outside of some areas such as Seoul, local real estate markets are suffering from unsold inventory," adding, "Even for government-led dwellings supply measures, it is unclear how long it will take to break ground, so even if the budget is injected artificially, it will be difficult for the construction economy to recover quickly."