Expectations for Supply Expansion... Construction Stocks Breeze

[Image source=Yonhap News]

[Asia Economy Reporter Eunmo Koo] As the government shows signs of shifting its real estate policy from demand management to supply expansion through a cabinet reshuffle, construction stocks, which had been weighed down by real estate regulation policies, are beginning to stir.

According to the Korea Exchange on the 8th, the stock price of HDC Hyundai Development Company closed at 23,900 won, up 8.14% (1,800 won) from the previous trading day. Since the news broke on the 4th that Byeon Chang-heum, president of Korea Land and Housing Corporation (LH), was nominated as the next Minister of Land, Infrastructure and Transport, HDC Hyundai Development's stock price surged 15.7% over two trading days, outperforming the KOSPI return (1.8%). Other construction stocks also showed an upward trend during this period. Dongbu Construction rose nearly double digits by 9.2%, and GS Construction (7.6%), Hyundai Construction (7.4%), and Daewoo Construction (4.9%) also showed strength.

With ongoing criticism of recent real estate market turmoil and price increases, and a ministerial change occurring during the process of preparing countermeasures, it is interpreted that expectations of a change in the government's policy stance have influenced the investment sentiment toward construction stocks. Since short-term supply-demand imbalances have caused market confusion, the government is expected to seek measures to calm the situation, with policies aimed at short-term supply expansion likely to be the top priority.

The fact that the government's policy direction has gradually shifted from demand management to supply expansion since the beginning of this year also simultaneously raises expectations for construction companies that can benefit from supply expansion. Over the past three years, real estate measures focused on demand management, but this year, three supply measures have been announced, indicating the start of policies based on the necessity of supply. In this context, the nomination of candidate Byeon can be interpreted as reinforcing the recognition and direction toward supply expansion.

Researcher Jae-seung Baek of Samsung Securities said, "The reason why the supply volume did not increase significantly despite the continued rise in real estate prices and the valuation discount on the construction sector deepened was due to the strengthening of real estate regulations focused on demand management," adding, "However, the supply measures presented this year suggest that policies will not act as obstacles to expanding supply volume in the future."

The construction sector is expected to see an increase in housing starts next year due to strong government-led policies, and related social overhead capital (SOC) projects are also expected to become active, leading to growth in the domestic market. Researcher Sera Park of Shin Young Securities predicted, "Benefits are expected mainly for construction companies with a high proportion of government contracts, and overall benefits will extend not only to large construction companies but also to small and medium-sized construction firms and building materials industries."

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