Park Jae-hyuk is a seasoned journalist who has provided comprehensive coverage of South Korea's corporate dynamics, economic policies, industry challenges and the global positioning of Korean companies. Based on the articles he has written since joining The Korea Times in 2016, his investigative approach has helped readers understand corporate governance, economic trends and business strategies shaping South Korea’s economy.
Major Korean builders face credibility crisis in wake of accidents
Rebar and wires are exposed in the collapsed parking garage of GS E&C's apartment complex construction site in Incheon in this May 2 file photo. Yonhap
By Park Jae-hyuk
Public distrust growing over safety of apartment buildings due to poor construction
By Park Jae-hyuk
Public distrust of domestic builders has been growing recently, as faulty construction methods have caused repeated collapses in apartment construction sites, according to industry officials, Monday.
Earlier this month, a government investigation revealed that GS E&C's omission of rebar in multiple pillars was the main reason behind a collapse in an underground parking garage of an apartment complex under construction in Incheon, April 29. HDC Hyundai Development Company has also faced criticism, since it was found that its negligence in safety measures resulted in a collapse at its apartment construction site in Gwangju in January last year, which killed six workers.
To protect their apartment brands, Xi and iPark, both companies decided to tear down and rebuild the entire problematic apartment complexes, despite the significant costs they would have to bear.
The accidents involving the two top-tier Korean builders, however, have sparked concerns over the safety of apartment buildings erected by other construction firms.
After the government announced the results of its investigation into the collapse at GS E&C's apartment construction site, a resident of Godeok Lotte Castle Beneluce in southeastern Seoul posted a photo showing exposed rebar on an outer wall of the apartment building.
Internet users, who said GS E&C's apartment buildings are “boneless,” also ridiculed Lotte E&C's Lotte Castle apartment brand, saying its apartment buildings are suffering “dislocations.”
“Doubts are growing over the construction of residential buildings in Korea, due to the collapse at GS E&C's apartment construction site in Incheon, which occurred after the collapse of HDC's apartment construction site in Gwangju last year,” NH Investment & Securities analyst Lee Min-jae said. “The recent accident will lower the overall valuation of domestic builders further.”
A partial collapse of an apartment building under construction is seen at HDC Hyundai Development Company's construction site in Gwangju in this January 2022 file photo. Yonhap
There is speculation that hikes in raw material prices between 2020 and 2021 could have induced local builders to cut corners in construction during the period to save costs. However, both GS E&C and the government denied the speculation, explaining that the deficit in steel bars would not have had a significant impact on total construction costs.
Some construction industry officials attributed the accidents to subcontracted firms relying heavily on unskilled migrant workers due to a shortage of young Korean workers.
Amid the growing concerns, the Ministry of Land, Infrastructure and Transport is inspecting GS E&C's apartment construction sites nationwide, with the aim of announcing its findings next month.
On Monday, the Seoul Metropolitan Government also began a month-long emergency inspection of apartment construction sites, which adopted a “flat slab” construction method similar to GS E&C's Incheon apartment construction site. The city government said the latest measure is intended to prevent any similar accidents in the future.
Financial market insiders are keeping a close watch on whether the recent credibility crisis will make it difficult for local builders to repay loans on their apartment construction projects. Korea's three credit rating agencies have already unveiled plans to tighten monitoring on GS E&C, indicating their intention to cut the builder's credit rating, once the government announces disciplinary actions for the company next month.
Experts pointed out that it will take a long time for domestic builders to restore public trust.
“If domestic builders want to improve their reputations, their apartment buildings must maintain a high standard of quality over a long period of time,” Korea Research Institute for Construction Policy researcher Lee Eun-hyung said. “The recent accident will be meaningful if it raises awareness among builders about the importance of safety measures in construction of apartment buildings.”