Anxiety may lead to housing shortage

Those in the construction industry face a recession worse than during the earlier times under the International Monetary Fund supervision of the Korean economy. They also are fully aware that they are in position to take the full brunt of the upcoming second phase of restructuring.

Already, some industry observers claim to have a list of companies targeted for liquidation.

The housing and residence construction industry markedly has lowered the rate of apartment construction and has put great efforts toward reduction. Many feel that an over-expanded company with sluggish sales might top the list for liquidation.

However, the reduction of 50% to 60% for this year¡¯s new housing development goal of 500,000 units might lead to a housing shortage two years hence.

Many in the construction industry foresee a few closures among the 18 companies currently under corporate workout programs (4 companies), court-receivership (10), or court mediation (4).

Many experts have noted that some of the companies that should have been closed down much earlier barely have been keeping above water through the help of stockholders and that they have been sources of much market instability through their large-scale share dumping practices.

Anxiety is on the same level among all the other construction companies. Excluding the 10 of the 47 companies listed on the stock exchange, none has an operating profit to interest repayment ratio above 1, which is expected to be the cutoff line for liquidation. As such, many companies have begun lobbying in hopes of removing their names from the list.

Already, a great deal of criticism has been arising for the expected liquidation of large non-viable companies with many foreign shareholders. Those in the stock market have raised their voices, saying that the financial authority must boldly close down even the large construction companies, a move that has been delayed for fear of a domino effect.

On the other hand, those in the construction industry have said that in this industry, with a great number of subcontractors and building material supply companies, closure of a large construction company could have a severe blow to the economy and should be delayed until the financial industry restructuring is completed."

Currently, many of the construction companies have entered a phase of mass layoffs in order to better their chances of being removed from the list. However, because that is leading to a decrease in the number of new apartment units being built, it is cause of yet another concern.

Hyundai Construction had a target to provide 35,000 new housing units this year alone. However, the company so far has completed the construction of 15,000 units. At this point, Hyundai has pushed back the completion date of 5,679 units in the Chang-dong area of Seoul to next year, and some of its other housing developments have fallen into limbo.

Daewoo Construction hoped to provide 19,544 new housing units this year. However, as of September, it will have provided only 4,301 units.

Hyundai Industrial Development has given up on about 7,000 units in nine areas including the Bojeong-ri area of Yong-in. LG Construction has pushed back the completion date of 2,090 units around Ilsan and Yong-in to next year.

Lee Byong-Ki eye@donga.com