1. 1 BRE Confidence Index for Residential Property (2005:Q3, September 2005) Presenter: Prof. Eddie C. M. Hui Research Centre for Construction and Real Estate Economics The Hong Kong Polytechnic University 26 September 2005 © The Hong Kong Polytechnic University 2005. All Rights Reserved.

2. 2 Project Team Hong Kong Polytechnic University Hong Kong Baptist University Texas A&M University, USA University of Cambridge, UK Collaborators

3. 3 Uniqueness of BRE Index Project It uses: Forward looking (predictive) approach – not based on historic data or price trends It focuses on:  Developmental changes in price expectations and confidence over time  Trends of housing demand, decisions and preferences It establishes: Time-series indices for different groups of housing participants It targets at: Residential property markets only We are: Independent, professional and experienced researchers in real estate economics

4. 4 Research Methodology Method: Longitudinal telephone survey Questionnaire design: Simple and straight-forward, and worded in everyday Chinese Rating scale: 5-Point Likert Scale Sample: 23,000 randomized telephone numbers per survey Successful interviews: Aim at 1,000 per survey Pilot: Trial study before full-scale surveys Survey duration: 5 four-hour sessions in the evening Interviewers: 20 independent and trained university students under close supervision Index computation: Based on non-equal weighted confidence scores of price expectations and sentimental questions (see separate slide later) Software used: Computer-Assisted Telephone Interviewing (CATI) and Statistical Package for the Social Sciences (SPSS)

5. 5 Groups of Respondents A. Homeowner A1. Owner in market, considering purchase A2. Owner and conditional purchaser A3. Owner and non-buyer B. Non-homeowner B1. Non-owner in market, considering purchaser B2. Non-owner and conditional purchaser B3. Non-owner and non-buyer

6. 6 Components of BRE Index 1.Rating for investment 2.Timing to buy 3.Current housing prices 4.Expected housing price changes 5.Expected economic conditions 6.Expected job opportunities 7.Expected family income 8.Affordability of home purchase

7. 7 Composition of Respondents (2005:Q3, Sept 2005)

8. 8 Surveys Conducted DatesValid Samples Completed Interviews Response Rates (%) Dec 20033,51581023.04 March 20044,21496022.78 June 20045,5921,17621.03 Sept 20044,35989320.48 Dec 20044,9321,15623.43 March 20054,9421,07821.81 June 20057,4761,12014.98 Sept 2005 5,8931,02917.46

9. 9 Neutral

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18. 18 Impact of Interest Rate Hike (% of Respondents) HONHO Very significant9.4 (3.1)8.1 (0.5) Significant23.3 (13.6)28.3 (16.6) Neutral16.3 (15.7)21.0 (21.2) Insignificant36.3 (49.7)22.9 (39.6) Very insignificant8.2 (12.1)4.9 (7.8) Don’t know6.5 (5.8)14.8 (14.3) Total100 (100) Figures in ( ) are results of June Survey

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20. 20 Existence of a “Bubble”? (% of Respondents) HONHO Agree46.9 (42.9) 51.6 (52.6) Disagree39.2 (44.0) 29.1 (33.6) Don’t know13.9 (13.1) 19.3 (13.8) Total100 (100) 100 (100) Figures in ( ) are results of June Survey

21. 21 Forecast of Economic Conditions (% of Respondents) 3 Months1 Year3 Years HONHOHONHOHONHO Better & Much Better 57.5 (56.0) 51.6 (47.5) 65.763.744.952.1 Same35.1 (37.7) 39.5 (44.2) 15.920.27.39.4 Worse & Much Worse 4.5 (3.7) 4.9 (6.0) 4.95.83.76.7 Don’t Know2.9 (2.6) 4.0 (2.3) 13.510.344.131.8 Total100 Figures in ( ) are results of June Survey

22. 22 Forecast of Family Income (% of Respondents) 3 Months1 Year3 Years HONHOHONHOHONHO Greatly & Somewhat Increase 30.2 (20.9) 18.8 (23.9) 38.239.049.442.2 Same60.0 (73.8) 70.9 (68.7) 40.843.518.029.6 Greatly & Somewhat Decrease 3.3 (3.7) 6.7 (4.6) 2.45.43.64.4 Don’t Know6.5 (1.6) 3.6 (2.8) 8.612.129.023.8 Total100 Figures in ( ) are results of June Survey

23. 23 Forecast of Job Opportunities (% of Respondents) 3 Months1 Year3 Years HONHOHONHOHONHO Better & Much Better 24.1 (18.9) 22.4 (24.0) 28.129.124.931.9 Same54.3 (67.0) 55.2 (52.5) 43.345.329.029.1 Worse & Much Worse 4.0 (5.8) 3.1 (5.5) 2.93.63.23.6 Don’t Know17.6 (8.3) 19.3 (18.0) 25.722.042.935.4 Total100 Figures in ( ) are results of June Survey

24. 24 Forecast of Ability to Buy a Property (% of Respondents) 3 Months1 Year3 Year HONHOHONHOHONHO Better & Much Better 19.6 (15.7) 18.9 (12.4) 33.126.544.138.6 Same62.1 (69.1) 64.1 (72.4) 47.850.222.926.0 Worse & Much Worse 8.9 (7.3) 3.5 (7.4) 8.15.44.84.5 Don’t Know9.4 (7.9) 13.5 (7.8) 11.017.928.230.9 Total100 Figures in ( ) are results of June Survey

25. 25 Conclusions The public confidence remains positive. The overall BRE Index fell marginally by 4 points to 704, the first-time dip since March 2004. The survey results show that respondents were concerned about recent increases in interest rates. Current housing prices, overall, were “somewhat too high” or “extremely high”. The wait-and-see attitude of potential home buyers is not yet over – despite a marginal increase in housing prices is expected. In order of importance, family income, economic condition and location, followed by interest rate are most important factors affecting housing decision. More importance is now attached to the interest rate. There were concerns about the property “bubble”, about half of respondents agreed that it still existed. As local economic conditions were expected to continue to improve, public confidence over the residential property market remains positive in the near future.

26. 26 Next Two Surveys Dec 2005 Mar 2006 RCCREE Website: http://www.bre.polyu.edu.hk/rccree/index.htm http://www.bre.polyu.edu.hk/rccree/index.htm BRE Index Project Website: http://www.bre.polyu.edu.hk/research/bre_index/ index.htm

27. 27 Q & A Thank You

28. 28 Investment Ratings (in percent) Survey No Very Good NeutralBad Very BadDK Total 1 (Dec 03)3.625.232.227.64.76.7 100 2 (Mar 04)1.42829.431.82.37.1 100 3 (Jun 04)1.82432.931.62.37.4 100 4 (Sep 04)1.626.628.928.63.610.7 100 5 (Dec 04)3.424.831.4281.910.5 100 6 (Mar 05)2.634.031.824.80.56.3 100 7 (Jun 05) 1.729.734.622.82.48.8 100 8 (Sep 05) 2.433.326.927.61.58.3 100

29. 29 Good / Bad time to Buy a Property (in percent) Survey No Very Good Somewhat Good Somewhat Bad Very BadDKTotal 1 (Dec 03)6.743.131.43.815100 2 (Mar 04)1.841.836.63.216.6100 3 (Jun 04)2.738.244.82.911.4100 4 (Sep 04)2.139.639.82.915.6100 5 (Dec 04)3.434.345.52.514.3100 6 (Mar 05)2.742.240.32.911.9100 7 (Jun 05) 2.236.047.81.712.3 100 8 (Sep 05) 1.329.749.84.015.2 100

30. 30 Current Housing Prices (in percent) Survey No Extremely High Somewhat too High About Right Somewhat too Low Extremely LowDK Total 1 (Dec 03)9.132.637.892.19.4 100 2 (Mar 04)15.435.733.85.70.29.2 100 3 (Jun 04)17.533.236.64.30.48 100 4 (Sep 04)16.940.432.13.915.7 100 5 (Dec 04)19.237.927.81.70.812.6 100 6 (Mar 05)19.741.526.95.10.56.3 100 7 (Jun 05)23.040.728.81.70.25.6 100 8 (Sep 05)25.742.122.21.10.48.5 100

31. 31 Expected Housing Prices in Next 3 Months (in percent) Survey NoRiseFallSameDKTotal 1 (Dec03)42.96.827.223.1100 2 (Mar04)64.34.516.414.8100 3 (Jun04)36.78.843.111.4100 4 (Sep04)491.832.816.4100 5 (Dec04)52.63.426.117.9100 6 (Mar 05)56.82.221.819.2100 7 (Jun 05) 32.97.810.548.8 100 8 (Sep 05) 47.99.226.416.5 100

32. 32 Expected Housing Prices in Next 3 Months (in percent) 1 (Dec03) 2 (Mar04)3 (Jun04)4 (Sep04)5 (Dec04)6 (Mar 05) 7 (Jun 05)8 (Sep 05) Above +20%01.91.11.53.20 1.71.1 +11% to +20%7.56.24.72.54.42.9 4.2 4.1 +6% to +10%19.824.118.722.417.724.3 16.0 14.6 +1% to +5%57.650.844.363.549.460.1 34.9 42.7 -1% to -5%10.32.77.81.52.52.0 12.2 9.4 -6% to -10%3.41.94.20.50.61.2 9.23.0 -11% to -20%003.1000 2.5 0.7 Above -20%001000 0.4 0 Don't Know1.412.415.18.122.29.5 18.9 24.4 Total 100

33. 33 Expected Changes in Housing Prices in the Next 3 Months (in percent) Survey No12345678 Survey DateDec 03Mar 04Jun 04Sep 04Dec 04Mar 05Jun 05Sep 05 Mean Value3.756.733.636.237.075.623.234.50

34. 34 Price Indices (1999=100) – Private Domestic Survey NoABCDEOverall 1 (Dec 03)63.264.470.079.185.665.4 2 (Mar 04)72.977.189.096.0102.998.1 3 (Jun 04)69.773.983.292.1106.374.7 4 (Sep 04)74.780.591.2100.3113.880.9 5 (Dec 04)76.482.694.1107.9120.883.3 6 (Mar 05)87.694.0108.7118.7125.994.6 7 (Jun 05)*84.990.6108.1119.3130.891.8 8 (Sep 05)*83.189.8108.4122.8126.290.8 * Provisional figures. Sources: Rating and Valuation Department, HKSAR.