South Korean Economy, Housing Construction & Lumber Shipments
South Korea’s economic growth slowed in the first quarter of 2016 from three months earlier due to continued sluggish demand at home and abroad. Gross domestic product in the first quarter expanded 0.5% from the previous quarter, slowing from a 0.7% on-quarter expansion three months earlier. Consumer spending contracted 0.2% from three months earlier, while exports also dwindled 1.1% over the cited period. A rise in the government’s spending helped local construction investment to gain 6.8% on-quarter in the first quarter, but facility investment plunged 7.4% over the cited period.
South Korea’s exports continued to dwindle from a year earlier in May but the rate of drop slowed significantly. Exports came to $39.78 billion in May, down 6% from the same month last year.
The 6% year-on-year decline marked the slowest rate of drop since the start of the year. In January, exports plunged 18.5%, marking the fastest rate of drop since August 2009.
Imports, on the other hand, continued to shrink at a fast clip, plunging 9.3% on-year to $32.7 billion in May resulting trade surplus of $7.08 billion marking the 52nd consecutive month of surplus.
South Korea’s consumer prices grew by 0.8% year-on-year in May. Country’s unemployment rate stood at 3.7% in May, compared to 3.9% tallied in April, or 3.8% recorded the same month in 2015.
The exchange rate for Canadian Dollar averaged at 905.89 won in May, 2016, slightly up by 0.96% from 897.27 in May, 2015 and up by 1.40 % from 893.35 in one month earlier.
Korean Housing Starts Summary and Market Condition:
Amid government efforts to prop up the local real estate market, South Korea’s new housing permits spiked 13.7% to 40,375 buildings from a year earlier 35,505 buildings. April marked the 16th consecutive month of a year-on-year increase in new home permits and this sharp rise in April was driven by a robust gain in permits issued in provincial areas.
Housing starts in the same period also increased 9.5% to 36,194 buildings from a year earlier 33,064 buildings.The apparent boom in the real estate market follows a series of government measures to revitalize the construction market and the entire economy, which include reduced regulations on the reconstruction of old homes, along with eased rules on debt-to-income and loan-to-value ratios to facilitate borrowing. The South Korea’s central bank also has kept its policy rate frozen at a record low of 1.5% since June 2015, further boosting people’s access to funds needed to buy or rent homes.
The number of wood building permits and wood building starts in year-to-date April of 2016 also increased 8.4% to 5,274 buildings and 16.2% to 4,699 buildings respectively compared with those in 2015.
Unlike a robust gain in both housing starts and permits, South Korea’s home transactions continued to shrink from a year earlier in May in an apparent sign of a slowdown in the property market.In 2015, home transactions spiked 18.8% year-on-year to an all-time high of 1,193,691.
With some of the government measures coming to end in late 2015, the housing market began to wane from the beginning of 2016.The number of home transactions in May of 2016 decreased about 19% from the same month last year. Such a drop was partly attributed to a base effect stemming from record numbers posted in 2015 due to a supporting government measures to revitalize the real estate market.
In May, home transactions in the capital region tumbled 16.1% year-on-year, while the number for rural areas plunged 21.8%. By type, transactions involving apartments units dropped 24.2%, with those involving row and detached houses also slipping 5.2% and 9.9% year-on-year, respectively.
BC softwood lumber export volume to South Korea for the first four months of 2016 sharply increased 31.6% to 123,166 cubic meters as compared to 93,626 cubic meters in 2015.However, export value for the same period increased only 5.4% to CAD$27.223 million as compared to CAD$25.834 million in 2015 due to choppy pricing of CDN lumber.
Volatile lumber prices in North America may result in further short-term choppy pricing as the market looks for signs of stronger demand.