Construction Orders for Residential Buildings Tepid
The author is an analyst of NH Investment & Securities. He can be reached at minjae.lee@nhqv.com. -- Ed.
Looking at Jul 2022 data, advance readings of domestic construction orders and the value of completed domestic construction jumped 12% y-y each. Construction orders for residential buildings in the private sector came in tepid again, totaling W6.5tn (-2% y-y). In contrast, those for non-residential buildings remained sound at W5.6tn (+84% y-y).
Advance reading of July domestic construction orders at W17.2tn
Looking at domestic construction data for July, the advance reading of domestic construction orders stood at W17.2tn (+12% y-y). By project owner, the public sector accounted for W2.5tn (-4% y-y) and the private sector registered W13.1tn (+9% y-y). By construction type, the figure broke down as W3.3tn (-23% y-y) for civil engineering and W12.9tn (+27% y-y) for buildings, with the buildings number dividing into W6.9tn (+1% y-y) for residential and W6.0tn (+82% y-y) for non-residential. Construction orders for residential buildings in the private sector totaled W6.5tn (-2% y-y), displaying a slowdown along with the real estate market since 2H21.
Advance reading of value of completed construction reaches W12.3tn in July
For July, the advance reading of the value of completed domestic construction jumped 12% y-y to W12.3tn. By project type, completed construction totaled W2.7tn (+3% y-y) for civil engineering and W9.6tn (+15% y-y) for buildings. The value of completed building construction broke down into W5.97tn (+12% y-y) for residential and W3.7tn (+19% y-y) for non-residential. The higher value of completed residential construction is attributed to an increase in housing starts over 3Q19~1Q22. Of note, the 12-month moving average for housing starts (through June 2022) remains lackluster at 503,000 units (-13% y-y).
Price trends for major construction materials
According to media reports, the September supply price of rebar for constructors stands at W895,000/ton (down W30,000/ton m-m). The average cement price has risen to W106,000/ton since Sep 1— by company, the cement price upped 11.7% at Sampyo Cement, 15.0% at Hanil Cement, 14.5% at Halla Cement, and 13.5% at Sungshin Cement.
As of June, the construction cost index climbed 11.5% y-y and 0.6% m-m to 147.3 (Jan 2015 = 100). While construction costs should expand in August on higher cement and labor costs, the pace of this increase will likely be limited by the reduced rebar price.