construction-147:-june-housing-data-and-investment-strategy

The author is an analyst of NH Investment & Securities. He can be reached at minjae.lee@nhqv.com. — Ed.  

In June, housing indicators remained largely sluggish. Although the government is planning to announce new real estate policy measures, concerns over domestic real estate conditions are likely here to stay for some time. That said, expectations are gradually rising towards the winning of overseas orders.

June housing starts total 39,000 units, housing completions 31,000 units

In June, housing starts in Korea totaled 39,000 units (-7% y-y). By region, housing starts came to 20,000 units (-9% y-y) for the Seoul Metropolitan Area, 5,000 units (-49% y-y) for the five regional metropolitan cities and Sejong, and 15,000 units (+31% y-y) for eight local provinces. The 12-month moving average of housing starts came in at 503,000 units (-13% y-y), continuing the downtrend that began in Feb 2022. In particular, housing starts are weakening in Incheon, Gyeonggi-do, Busan, and Daegu, where concerns over real estate market conditions are mounting. Of note, housing starts on a cumulative basis through June stood at 149,000 units (-34% y-y) nationwide, 81,000 units (-29% y-y) for the Seoul Metropolitan Area, 21,000 units (-37% y-y) for the five regional metropolitan cities and Sejong, and 47,000 units (-41% y-y) for eight local provinces.

In Jun 2022, housing construction was completed for 31,000 units (-8% y-y). By region, the figure broke down as 14,000 units (-28% y-y) in the Seoul Metropolitan Area, 6,000 units (+14% y-y) in the five regional metropolitan cities and Sejong, and 11,000 units (+17% y-y) in eight provinces. Unlike housing construction starts, housing construction completions have remained on the rise, with the 12-month moving average reaching 437,000 units (+6% y-y). Construction completions are to center mainly on projects that began construction in 2020.

In June, housing permits given for 260,000 units

Nationwide, housing permits were given for 260,000 units (+13% y-y) in Jun 2022, breaking down by region as: Seoul Metropolitan Area 96,000 units (-18% y-y), five regional metropolitan cities and Sejong 57,000 units (+53% y-y), and eight provinces 107,000 units (+40% y-y). We note that cumulative (January~June) permit numbers totaled 852,000 units (+12% y-y) nationwide, dividing as: Seoul Metropolitan Area 311,000 (-19% y-y), five regional metropolitan cities and Sejong 183,000 (+32% y-y), and eight provinces 107,000 (+52% y-y). New permits have continued to uptrend nationwide, excluding the Seoul Metropolitan Area.

August construction sector investment strategy: Sluggish housing indicators vs expectations for overseas orders

Most domestic housing indicators have remained sluggish of late. Though the government is slated to announce new housing market measures in August, new measure momentum is unlikely to be enough to offset grave concerns over the housing market. In contrast, overseas order expectations have been growing. According to media reports, a Saudi prince is to visit Korea in November, and during his visit, both the NEOM and nuclear power plant (NPP) projects are likely to be high on the agenda for discussion. Trading at a P/E of 6.1x as of Aug 10, domestic construction shares appear to lack strong valuation merit.

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IL PRIMO ECOMMERCE SPECIALIZZATO IN DELIZIE AL TARTUFO E CAVIALE – CAVIAREAT.COM

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