South Korea Economy, Construction & Lumber Shipments
South Korea’s economy is expected to lose steam slightly in 2019 due to weakening exports and sluggish investment, coupled with the tepid domestic demand. South Korea’s GDP in 2019 is expected to grow 2.6% which is a slight drop from 2018’s 2.7%.
Key Economic Highlights for the 3rd quarter of 2018 (July – September, 2018) are as follows:
- GDP expanded 0.6% from the 2nd quarter.
To meet the target growth of 2.7% for 2018, the 4th quarter GDP has to expand at least 0.84%.
- GDI climbed 0.7%, turning around from a 1% decline in the 2nd quarter.
- Exports rose 3.9% from the 2nd quarter, but imports inched down 0.7%.
- Private consumption edged up 0.5%, widening from a 0.3% rise in the 2nd quarter.
- Government spending advanced 1.5%.
- Construction investment tumbled 6.7%, the sharpest on-quarter drop since the 1st quarter of 1998, when it slid 9.7% in the midst of the Asian financial crisis.
The sharp contraction in the building sector came as the South Korean government has been pressing the real estate market to get high-flying housing prices under control.
- Corporate investment declined 4.4% following a 5.7% decrease in the 2nd quarter.
Overall, positive consumption and exports in the 3rd quarter partly offset the sluggish performances in construction and facility investment.
The exchange rate for Canadian Dollar averaged at 857.58 won in the 3rd quarter of 2018, down by 5.04% from 903.08 in the same quarter of 2017 and up by 2.60% from 835.81 in the previous quarter.
Due to the decrease of construction investment amid ongoing government intervention to curb rising house prices and cool down the overheated housing market, South Korea’s housing starts in number of buildings for the year-to-date October, 2018 decreased 15.5% to 69,574 buildings while that in number of units increased 8.3% to 361,289 units showing a market demand trend toward smaller size of apartment. Housing permits in number of buildings and units for the same period of 2018 also decreased 10.5% and 17.9% respectively to 87,427 buildings and 412,246 units from a year earlier 97,671 buildings and 502,266 units.
Additionally, current difficulty in getting building permits for wood structures caused by tighter seismic design requirements for small scaled buildings, the number of wood building starts and permits for the first ten months of 2018 decreased 14.2% to 9,959 buildings and 22.4% to 11,009 buildings respectively while those for total floor areas decreased 13.7% to 925,162 m2 and 21.3% to 1,016,031 m2 respectively from the same period of 2017.
Statistics Korea’s data showed the home ownership rate in South Korea came to 55.9% in 2017, 0.4%-points up from 2016.
The average price of homes was 225 million won (about US$199,000), and the average size stood at 86.3 m2.
The data showed that the apartments are still the most favored type of dwelling by South Koreans, while percentage of low rise and single detached housing is gradually increasing.
The data also showed that 56.1% of the homeowners were men in 2017. The rate of female homeowners has risen steadily since logging 41.4% in 2012. The data said 25.6% of individual homeowners were in their 50s, followed by those in their 40s with 24.3%, those in their 60s with 18.4% and those in their 30s with 13.2%.
BC softwood lumber export volume to South Korea for the first nine months of 2018 decreased 18% to 176,702 cubic meters as compared to 216,226 cubic meters for the same period of 2017.
This significant downward trajectory resulted from the continuously weakened BC Coastal shipments in the second quarter of 2018 and decreased housing starts in the South Korean residential construction segment forced by the South Korean government’s strong intervention to limit the supply of new homes since August 2016 to curb the rise in household debts and curb rising house prices.
However, export value for the same period slightly increased 0.7% to CAD$62.339 million as compared to CAD$61.932 million for the same period in 2017 mainly due to the upward Canadian lumber prices.