'35th Floor Rule' Lifted and Presidential Candidates' Pledge to Expand Supply... Will Construction Stocks Benefit?

[Image source=Yonhap News]

[Asia Economy Reporter Kwon Jae-hee] Seoul Mayor Oh Se-hoon has announced the '2040 Urban Plan,' which includes lifting the '35-floor regulation' that has been in place for the past eight years, bringing a favorable wind to the construction market. It is expected that reconstruction projects will accelerate in Apgujeong-dong and Yeouido, which are representative reconstruction complexes in Seoul. Accordingly, large construction companies with extensive experience in securing reconstruction projects are expected to benefit.

According to the construction capability evaluation rankings of construction companies announced annually by the Ministry of Land, Infrastructure and Transport, Samsung C&T ranked first in 2021, Hyundai Engineering & Construction second, and GS Engineering & Construction third. Following them are POSCO Engineering & Construction, Daewoo Engineering & Construction, Hyundai Engineering, Lotte Engineering & Construction, DL E&C, HDC Hyundai Development Company, and SK Ecoplant, all within the top 10.

Hana Financial Investment named GS Engineering & Construction as the biggest beneficiary in urban maintenance projects. Hana Financial Investment gave GS Engineering & Construction a 'Buy' rating with a target price of 57,000 KRW.

Seo Hyun-jung, a researcher at Hana Financial Investment, said, "GS Engineering & Construction has rapidly increased its supply volume since 2015 based on its strong brand power, 'Xi.' Aggressive housing expansion is expected with the market improvement following the easing of maintenance project regulations."

GS Engineering & Construction held a 9% market share in the urban maintenance market as of 2021.

Hana Financial Investment also named Daewoo Engineering & Construction as a leading housing stock. It is a construction company that has focused on housing development projects for a long time and has maintained strong competitiveness in housing projects along with urban development projects with competitiveness over the past five years, as well as the expansion of maintenance projects in Seoul and the metropolitan area. It supplied 21,000 units in 2019, 33,000 units in 2020, and 28,000 units in 2021, with plans to supply 30,000 units this year. Housing sales growth is expected to continue based on solid supply performance.

Daewoo Engineering & Construction was given a 'Buy' rating with a target price of 8,600 KRW.

Furthermore, the fact that presidential candidates are also making supply expansion a key pledge is expected to act as a positive factor for construction stocks. Both candidates from the two major parties have commonly proposed expanding new construction starts and easing regulations on urban maintenance projects due to the shortage of housing supply.

Yoon Seok-youl, the People Power Party presidential candidate, announced a pledge to supply 2.5 million housing units within his five-year term (1.3 million in the metropolitan area, 500,000 public units), along with easing regulations on reconstruction and redevelopment.

Lee Jae-myung, the Democratic Party presidential candidate, stated he would supply 3.11 million housing units within his five-year term.

Kim Se-ryeon, a researcher at Ebest Investment & Securities, analyzed, "Regardless of the presidential election results at this point, we recommend large construction stocks with a high proportion of building materials and reconstruction, which inevitably will see investment. Construction stocks, whose growth potential has been artificially suppressed, will breathe new life."

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