South Korea Infrastructure Report Q2 2016
BMI View: We have downgraded our growth forecast for South Korea's construction sector on the back ofnew mortgage rules from early 2016, which will dampen the residential construction market from 2016onwards. With a struggling non-residential building sector, it is the infrastructure sector, and notably theenergy and utilities sub-sector, which will boost South Korea's overall construction industry growth intoweak but positive territory.
Latest Updates And Structural Trends
We expect a slight expansion in South Korea's construction sector of 1.41% in real terms for 2016, downfrom 1.98% over 2015. For 2017, we maintain our growth forecast of 1.32%. Overall constructionindustry growth in South Korea will remain in positive territory over our forecast period to 2025, despitebeing in the low 1-1.5% real growth bracket.
With negative growth rates in the non-residential building sector and weak long-term growth in theresidential building sector, overall building industry real growth will remain in negative territory over ourforecast period 2016-2025.
We downgraded residential building real growth rates this quarter on the back of new amortised loanrules and tougher lending rules to take effect in 2016. In addition, the lack of significant income increase,an ageing population and an increasing oversupply of new homes provide a weak long-term picture forthe residential building sector.
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