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Construction investment forecast to slow from H2

All News 09:06 June 20, 2017

SEOUL, June 20 (Yonhap) -- South Korea's construction investment, one of the economy's main drivers, will likely start to lose ground in the second half due to tougher regulations and a housing glut, analysts said Tuesday.

Some even painted a gloomier picture of the country's construction investment for 2018, warning it could plunge into negative growth in the aftermath of the tightened rules. Growth of the nation's construction investment has been in positive territory since 2012.

According to the Korea Center for International Finance, the global investment bank Societe Generale has forecast annualized growth of South Korea's construction investment to tumble to 0.8 percent in 2018 from this year's 9.2 percent.

Societe Generale economist Oh Suk-tae said construction investment could come as a drag on Asia's fourth-largest economy starting this year, though it contributed 1.6 percentage points to the economy's growth in 2016.

Societe Generale had expected the country's construction investment to expand 3.5 percent on-year in 2017. In the first quarter of this year, it soared 11.3 percent from a year ago following a 10.7 percent on-year increase in 2016.

Construction investment forecast to slow from H2 - 1

Nomura Securities Co. of Japan projected South Korea's construction investment to grow 6.7 percent on-year in 2017 before shrinking 1 percent next year, hit by Seoul's latest package of measures to cool the hot property market. It would mark the first on-year decline in six years.

The government said Monday it will tighten lending rules on homes in some designated areas starting early next month in a bid to curb real estate speculation. The measures, which will be effective starting July 3, came as the nation's household debt, including credit purchases, hit a record 1,359.7 trillion won (US$1.2 trillion) at the end of March.

LG Economic Research Institute echoed the view.

"Construction investment will likely post a single-digit gain this year before slowing down sharply next year," said Lee Keun-tae, a senior researcher at the think tank. "Next year's growth could be close to zero, given this year's sharp increase."

Yoon Chang-yong, a senior investment strategist at Shinhan Investment Corp., forecast South Korea's construction investment to grow about 5 percent this year and remain flat in 2018 before lapsing into negative growth in 2019.

"The latest anti-speculation measures are not very tough, but they will likely prompt demand for apartment reconstruction to slow sharply starting next year, leading to a plunge in construction investment," he said.

Hyundai Research Institute, meanwhile, predicted the country's construction investment to expand 5.7 percent on-year in the second half of the year due to sluggish infrastructure spending and apartment building.

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