Korea's construction market is showing a clear slump as workloads shrink simultaneously in the public and private fields.
According to the Monthly construction market trend (September 2026 issue) released by the Korea Research Institute for Construction Policy on the 10th, on July the aggregates of domestic construction orders totaled 15.8 trillion won. That was down 30.6% from the same month a year earlier. It also fell 24.5% from the previous month and was about 1.3 trillion won below the July average over the past three years.
The public institutional sector fell 21.9% from a year earlier as the effect of front-loading in the first half by the government was exhausted and even the bidding for large civil engineering projects wrapped up. The private institutional sector also declined 33.3% as all areas—civil engineering, dwellings, and nonresidential—contracted together. The disappearance of the optical illusion created by early bidding in the first half is also cited as a cause of this poor performance.
The construction progress payment amount, which indicates the actual degree of work performed, was 11.7 trillion won, up a slight 2.4% from the same month last year, but it did not reach the three-year average (12.8 trillion won). The public field (up 12.4%) and civil engineering work (up 12.6%) propped up the overall performance to some extent, but the private field rose only 0.4% and residential building fell 7.9%, hindering a broader recovery.
The shortage of work in the construction industry translated directly into fewer jobs. In July, construction workers numbered 1,865,000, down 1.5% from a month earlier and 3.0% from a year earlier, respectively. That contrasts with a 0.4% year-over-year increase in total employment across industries. With stagnation in the private market and sluggish residential building persisting, and given that the labor market responds late to business cycles, corporations appear to have run out of capacity for new hiring.
Heavier cost burdens are also holding construction companies back. The construction cost index in July was 138.59, up 5.8% from the same month last year. That outpaced the overall consumer price inflation (2.8%) over the same period by more than double. The cost index has risen for 12 straight months since August last year and has climbed 5.1 points so far this year. While prices for some materials such as cement showed signs of stabilizing, the producer price (up 9.9%) and market price (up 18.3%) of standard rebar surged, increasing material cost pressures.
In addition, the business sentiment felt on construction sites has frozen. The composite performance index of the Construction Business Survey Index (CBSI) in August was 72.7, down 0.1 point from the previous month. Indices related to newly secured workloads (new orders +4.1p) and backlog (+2.2p) improved slightly, but worsening actual work progress (progress -2.9p) and conditions for collecting construction payments (-4.1p) pulled the index down.
The outlook index for September also stood at 74.1, below the baseline of 100. The divergence in sentiment between Seoul (81.5) and the provinces (71.1) appears to be widening.
Research fellow Lee Ji-hye said, "Construction orders in July fell well below the same month last year and the recent three-year average as both the public and private sides contracted," and added, "Progress improved slightly on the back of increases in the public and civil engineering institutional sector, but stagnation in private progress and sluggish residential building continue." Lee added, "Whether public procurement plans are executed in practice and whether starts and orders for private dwellings and nonresidential projects recover will determine the course of the construction economy in the second half."