Pre-sale Volume to Be Abundant in 2021
The author is an analyst of NH Investment & Securities. He can be reached at minjae.lee@nhqv.com. -- Ed.
Over Jan~May, domestic apartment pre-sale volume amounted to 130,000 units, a 50,000 unit y-y rise. Based on the 12-month moving total as of May 2021, apartment pre-sale volume stood at 410,000 units, a figure surpassing the level at the same period in 2016. The 12-month moving total as of Apr 2021 for domestic housing construction starts was 580,000 households, a level on par with that at the same point in 2016.
Pre-sale volume to be abundant in 2021
Based on the 12-month moving total as of May 2021, domestic apartment pre-sale volume stood at 410,000 units, exceeding the level seen at the same time in 2016 (400,000 units). Adding in the facts that some volume has been deferred to 2H21 and that most new pre-sale plans are to concentrate in 2H21, pre-sale order volume is to be abundant in 2021. Considering that apartment pre-sales totaled 520,000 units in 2015 and 450,000 units in 2016, a comparably-sized real estate boom appears to be emerging in 2021.
Meanwhile, the 12-month moving total as of Apr 2021 for domestic housing starts was 580,000 units, a level on par with that at the same time in 2016 (Jun 2015~May 2016). However, the number of housing construction starts this year looks on track to exceed the 2016 level as apartment pre-sales are likely to rise y-y in 2H21. Thus, with both pre-sale and housing construction start figures proving higher than predictions, sales and NP performances at domestic construction players’ housing businesses should continue to climb going forward.
Over 2017~2020, the annual number of units sold averaged around 330,000. The market shares of large constructors expanded over this period, leaving few opportunities for small/mid-sized construction players. However, we believe that if apartment pre-sale exceeds the 400,000 unit mark, the supply capacity of large firms will likely be insufficient, in turn creating opportunities for small/mid-sized firms. Given such, it will be important to steadily monitor the progress of monthly pre-sales in order to determine whether small/mid-sized players are in a beneficial situation.
Key construction/real estate news from last week
On May 28, reform measures for non-priority apartment subscriptions in Korea began to be implemented in earnest. Up until now, non-priority apartment subscriptions have been made available to adults regardless of whether they currently own housing or not. As a result, many people had flocked from all over the country to subscribe for non-priority apartments—for example, 260,000 people applied for just three units in the Acro Seoul Forest complex, and 300,000 people applied for just a single unit in the DMC Pine City complex. Accordingly, in order both to prevent overheated competition and to protect end-users, the requirements have been changed so that one now must be a non-homeowner living in a certain construction project area in order to join the subscription list in that area. However, this rule will likely come to be revised as it is viewed as being unfair that people living in relatively close proximity to Seoul (ie, neighboring metropolitan areas) are unable to join non-priority subscription lists for apartment construction projects in Seoul.