The number of bankruptcies among South Korean builders reached a five-year high this year amid a construction market downturn. Regional builders accounted for most of these bankruptcies, with Busan-based companies leading the pack. One in five bankruptcies involved a company from the Southern port city.
From January to November this year, 27 construction companies went bankrupt, according to the Ministry of Land, Infrastructure and Transport on Dec. 12. The list includes 11 general contractors and 16 specialized builders.
This marks the highest number of bankruptcies since 2019. While 2018 saw 40 bankruptcies, the figure fell to 29 in 2019, then dropped to 24 in 2020 and 12 in 2021. However, the trend reversed with a modest increase to 14 in 2022, rising to 21 last year and reaching 27 this year.
Busan recorded the most bankruptcies with six cases, followed by Jeonnam (South Jeolla Province) at four, Gyeongnam (South Gyeongsang Province) at three, Gyeonggi Province at three, Gyeongbuk (North Gyeongsang Province) at two, and Gwangju at two. Seoul, Ulsan, Gangwon Province, Chungnam (South Chungcheong Province), Jeonbuk (North Jeolla Province), and Jeju each reported one bankruptcy.
The number of builders that shut down also increased. Between January and October this year, 2,104 construction companies shut down, up 10.4% from the same period last year. General contractor closures rose by 20.9% to 394, while specialized contractor closures increased by 8.3% to 1,710.
The outlook for small and medium-sized regional builders also remains bleak. Next year’s government budget for social overhead capital (SOC) projects has been slashed to 25.434 trillion won, down 3.8% from this year. Coupled with a prolonged construction sector downturn, the industry faces significant headwinds.
“The surge in bankruptcies this year is mainly due to rising construction costs over the past two years, which have added financial burdens for companies,” said Kim Young-duk, a senior researcher at the Construction and Economy Research Institute. “With external uncertainties like the Iran-Israel conflict and heightened political instability in Korea, the construction and real estate markets will likely face even tougher challenges in the first half of next year.”
