Despite Regulatory Freeze... Construction Companies Increasing New Housing Sales

Conflict Over Sale Prices Delays Supply
Housing Units Flood Market in First Half of Year
Daewoo Construction Plans 34,000 Units
Six Major Builders Target 130,000 Units

[Asia Economy Reporter Donghyun Choi] Although there are concerns about a contraction in the housing market due to the government's stringent regulations, major large construction companies are planning to significantly increase new supply volumes this year. The industry explains that this is because large projects that were delayed last year due to conflicts over sale prices with the Housing and Urban Guarantee Corporation (HUG) are concentrated in the first half of the year. However, with the private land sale price ceiling system exemption ending at the end of April and additional government real estate measures and other policy variables, the prevailing forecast is that actual housing supply will be drastically reduced compared to planned volumes.

According to the industry on the 17th, six major domestic construction companies?Hyundai Engineering & Construction, GS Engineering & Construction, Daewoo Engineering & Construction, Daelim Industrial, HDC Hyundai Development Company, and SK Engineering & Construction?that have announced housing supply plans so far this year have a total supply volume (including residential-commercial complexes and officetels) of 125,679 units. By company, the figures are ▲Hyundai Engineering & Construction 21,089 units ▲GS Engineering & Construction 25,641 units ▲Daewoo Engineering & Construction 34,000 units ▲Daelim Industrial 20,357 units ▲HDC Hyundai Development Company 20,175 units ▲SK Engineering & Construction 4,417 units. This represents a 58.5% increase compared to the volume supplied by these companies last year (79,295 units).

Among the six construction companies, the one with the largest supply plan is Daewoo Engineering & Construction, the only company announcing plans for more than 30,000 units. Daewoo Engineering & Construction achieved the highest housing supply performance among domestic construction companies last year. This year, Daewoo plans to introduce 28,638 apartments, 1,732 residential-commercial complex units, and 3,630 officetel units nationwide. By region, they plan to supply 24,016 units in the Seoul metropolitan area and 9,984 units in other provinces. Among these, urban renewal projects such as redevelopment and reconstruction account for 16,397 units, a 150% increase compared to 6,334 units last year. Additionally, they will sell 2,153 units through their own projects such as Incheon Luwon City (870 units) and Hanam Gamil District (496 units), and 15,540 units through private consignment projects such as Incheon Handeul District (4,805 units). In Seoul, they will sell apartments such as Dunchon Jugong (1,138 units) around April and Daechi 1 District reconstruction in Gangnam-gu (116 units) in October.

The company with the largest increase in supply volume compared to last year is HDC Hyundai Development Company. Last year, the company announced a supply plan of 15,888 units but actually supplied only 6,565 units, less than half. This was due to the postponement of large-scale projects in the Gangnam area of Seoul, such as Dunchon Jugong in Gangdong-gu (12,032 units) and Gaepo Jugong 1 Complex in Gangnam-gu (6,642 units), to this year. HDC Hyundai Development Company, participating in these projects as a consortium member, is responsible for 2,742 units in Dunchon Jugong and 3,128 units in Gaepo Jugong 1 Complex. This year, the company started sales with 'Dangjin I-Park' in Eumnae-dong, Dangjin-si, Chungnam on the 3rd of this month, and plans to supply 825 units of Seoul Forest 2nd I-Park and 528 units of Local Housing 2nd in Seongsu-dong, Seongdong-gu, Seoul in April. Between April and June, they plan to conduct general sales for Dunchon Jugong, and between September and October for Gaepo Jugong 1 Complex. In October, they will supply 578 units in the redevelopment of Susaek 13 District in Eunpyeong-gu.

Meanwhile, although construction companies’ supply plans have greatly increased, there are observations that the actual volume sold will fall short of these plans. This is because the government recently signaled that its policies will focus not just on stabilizing housing prices but on 'housing price decline,' which could disrupt business plans. In fact, last year, sales schedules were significantly delayed due to the Housing and Urban Guarantee Corporation (HUG)’s strengthened price ceiling standards in high-priced areas and the introduction of the private land sale price ceiling system. For example, Samsung C&T announced a supply plan of 9,702 units last year but actually supplied only 3,895 units, about 40%. Hyundai Engineering & Construction and Daelim Industrial achieved sales rates of 79% each, while GS Engineering & Construction barely exceeded half at 57.6%. Researcher Kwangsoo Lee of Mirae Asset Daewoo recently analyzed in a report that "the average ratio of actual sales volume to planned supply by construction companies is about 75%." Applying this figure simply to the supply plans of the six companies this year results in about 94,000 units. Seojinhyung, president of the Korea Real Estate Society, said, "The land held by construction companies has been largely depleted, and the newly supplied public land is small in scale. Especially, once the sale price ceiling system is fully implemented, the volume of urban renewal projects is expected to decrease significantly, making it difficult for construction companies to achieve their business performance."

This content was produced with the assistance of AI translation services.