Builders in upbeat mood amid reviving realty market

The market for public sale of new homes has entered a “recovery” phase as the government continues its deregulation campaign to revitalize the realty market this year again after last year. Large construction companies have displayed good results in recent public sale of new apartments that they build.

Hyundai Amco said on Thursday that a final sale tally of apartment units at its “Wirye Amco Town Centro El complex” earmarked for Grade 1 and 2 people in eligibility for home purchase showed that a total of 7,434 people applied to purchase 604 apartment units (excluding 69 homes set for special supply) up for grabs, which translates into a competitive ratio of 12.31:1. Notably, for the 216 units of Type A apartment, which measure 98 sq. meters per unit, as many as 3,614 Grade 1 would-be buyers applied to post a competitive ratio of 16.71:1, thus enabling the builder to end receiving applications from among Grade 1 people only.

The "Wirye Amco Town Floriche complex," which posted a competitive ratio 1.63: at the public sale in May last year, forced the builder to continue taking applications even from among Grade 3 people, a far cry from the current situation. A source at Hyundai Amco said, “We believe that people are seeking to apply to purchase homes en masse amid growing expectations due to deregulation of the real estate market.”

The "Lotte Castle Gold Park" apartment complex on Shiheung-daero in Seoul’s Geumcheon district, which was the first large-scale project put up for public sale this year, already ended taking applications from Grade 1 and 2 people in eligibility for home purchase on Thursday last week, but the mock-up model housing of the project is still packed with visitors. According to Lotte Engineering & Construction, more than 4,000 people visited the model housing on last Sunday alone, some two weeks after the opening of the model housing, and more than 100 people are visiting it daily this week.

Sohn Seung-ik, director for public sale of Lotte Castle Gold Park, said, “As the government announced that the period of restriction for transfer (sale) of the right to buy new homes sold by private-sector builders in the Seoul metropolitan region will be reduced from one year to six months, investors who seek to sell their purchase right (if they win the right) seem to display keen interest,” adding, “As people who acquired the right also continue to visit again, our mock-up model housing remains popular.”

With the new apartment market for public sale gaining ground, builders’ share prices are also on the rise in tandem. Analysts began presenting positive outlook on builders’ share prices, which saw sharp declines from last year to recent weeks. Since the Land, Infrastructure and Transport Ministry announced Wednesday a “2014 work plan” that includes measures to deregulate the housing market, major builders’ shares have advanced over the past three consecutive trading days.

GS Engineering & Construction jumped by 11 percent on Friday from Tuesday’s close, while Daewoo Engineering & Construction rose by 6 percent, Samsung C&T gained 4 percent, and Hyundai Engineering & Construction added 2 percent.

“If the realty market deregulation policies announced recently by the government are put into practice, projects for reconstruction of old apartment complexes and redevelopment of residential areas will increase, which will give boost to builders’ business performance,” said Ahn Joo-won, a researcher at IBK Securities. “Investors are advised to pay attention to firms that hold large volume of land earmarked for housing projects and actively conduct housing projects on their own.”