[Edaily Reporter Park Soon-yeop] While rising interest rates and construction cost pressures are weighing on the domestic construction sector, an analysis suggests that construction stocks still have room for price appreciation in the second half of the year. Although the investment environment in the domestic housing market remains challenging, the assessment is that momentum from overseas orders—such as nuclear power projects, investments in the U.S., and reconstruction in the Middle East—could stimulate investor sentiment in the construction sector.
In a report published on the 10th, Bae Se-ho, an analyst at iM Securities, maintained his “Overweight” investment rating for the construction sector. Analyst Bae noted, “The domestic real estate market faces more negative factors, such as rising interest rates, increased construction costs, and labor disputes,” but added, “In the short term, there is stronger momentum in overseas orders, including global nuclear power projects, Middle East reconstruction, and investments in the U.S.”

The assessment is that a rapid recovery in the domestic construction sector is unlikely in the second half of the year. As of May this year, the cumulative number of new housing units released for sale nationwide reached 90,000, a 40% increase year-over-year, but this figure fell short of the five-year average. iM Securities noted that, considering rising interest rates, loan regulations, and increased construction costs, there is a high probability that some sales schedules will be postponed. Consequently, the firm projected that the annual volume of new housing units released for sale this year would be around 250,000, with the second-half volume expected to remain at approximately 150,000 units—similar to the previous year.
The non-residential sector is also expected to continue its sluggish trend. The cumulative nationwide floor area under construction as of April this year increased by 4.4% year-on-year, but this was largely due to a base effect resulting from the increase in residential construction starts. The floor area under construction for non-residential projects decreased by 4% year-on-year, with commercial construction starts falling by 7% in particular. The report explained that, given rising interest rates and the burden of construction costs, it will be difficult for non-residential construction starts to increase in the second half of the year.
Rising construction costs were also cited as a burden. The report identified several factors driving up costs, including rising material prices due to the war in the Middle East, increases in the minimum wage, stricter safety regulations, and the potential for extended construction periods resulting from the implementation of the “Yellow Envelope Act.” It analyzed that as the number of cases where construction costs per square meter exceed 10 million won in major urban renewal projects in Seoul increases, the profitability of reconstruction and redevelopment projects could deteriorate.
However, from a stock price perspective, the judgment is that momentum from overseas orders could partially offset the slump in the domestic real estate market. Analyst Bae cited global nuclear power, investment in the U.S., and Middle East reconstruction as triggers for construction sector stock prices in the second half of the year. In particular, he noted that the likelihood of participation by domestic construction companies is increasing as the U.S. pushes to break ground on 10 large-scale nuclear power plants by 2030 and relaxes nuclear power licensing regulations.
#Hyundai E&C was identified as a key beneficiary of the nuclear power momentum. iM Securities analyzed that Hyundai E&C has a good chance of securing orders for large-scale U.S. nuclear power plants and Small Modular Reactor (SMR) projects. The firm explained that overseas nuclear power pipelines, such as the Matador project in Texas, Holtec’s SMR project, and projects in Bulgaria and Vietnam, also warrant attention.
#Samsung E&A was highlighted as a stock with potential for momentum from U.S. investment and Middle East reconstruction. With South Korea having pledged $350 billion in investment in the U.S. during tariff negotiations, the prospect of specific projects in energy, LNG, and nuclear power being announced in the second half of the year was cited as a positive factor. Samsung E&A is assessed to have room for improved investor sentiment, as it is securing business opportunities in the energy infrastructure sector, such as ammonia and SAF projects in the U.S.
Researcher Bae stated, “Despite negative factors such as the sluggish domestic real estate market, rising interest rates, and increased construction costs, there is sufficient momentum for construction stocks to rise in the second half of the year,” adding, “I recommend Hyundai Engineering & Construction, which holds the largest nuclear power pipeline within the construction sector, and Samsung E&A, which has opportunities in U.S. investment and Middle East reconstruction projects.”