1

BRE Confidence Index forResidential Property

(September 2006 Survey)

Presenter: Prof. Eddie C. M. Hui

Research Centre for Construction and Real Estate EconomicsThe Hong Kong Polytechnic University

4 October 2006

© The Hong Kong Polytechnic University 2006. All Rights Reserved.

2

Project Teams

Hong Kong Polytechnic University

Hong Kong Baptist University

Texas A&M University, USA

University of Cambridge, UK

Collaborators

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 housing 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

Research Methodology

• Method: Longitudinal telephone survey• Questionnaire design: Simple and straight-forward, and worded in

everyday Chinese• Rating scale: 5-Point Likert Scale• Sample: 28,000 randomized telephone numbers per survey• Successful interviews: Aim at 1,000 per survey• Pilot: Trial study before full-scale surveys• Survey duration: 6 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• Software used: Computer-Assisted Telephone Interviewing (CATI) and

Statistical Package for the Social Sciences (SPSS)

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

Components of BRE Index

1. Rating for investment2. Timing to buy3. Current housing prices4. Expected housing price changes5. Expected economic conditions6. Expected job opportunities7. Expected family income8. Affordability of home purchase

7

Composition of Respondents(Sept 2006 Survey)

A111%

A214%

A326%B1

13%

B324%

B212%

A1 A2 A3 B1 B2 B3

8

Surveys ConductedDates Valid

SamplesCompleted Interviews

Response Rates (%)

Dec 2003 3,515 810 23.04

March 2004 4,214 960 22.78

June 2004 5,592 1,176 21.03

Sept 2004 4,359 893 20.48

Dec 2004 4,932 1,156 23.43

March 2005 4,942 1,078 21.81

June 2005 7,476 1,120 14.98

Sept 2005 5,893 1,029 17.46

Dec 2005 6,153 1,007 16.37

Mar 2006 6,537 1,056 16.15

June 2006 7,165 1,034 14.43

Sept 2006 7,125 1,008 14.15

9

BRE Index (0-1000)

564587

690 686 688702 714 708717 719 718714

579 556620 603

720717707 701

704

0

100

200

300

400

500

600

700

800

Homeowner Non-homeowner Overall

BR

E In

dex

First Survey (Dec 2003) Second Survey (Mar 2004) Third Survey (J un 2004)Fourth Survey (Sept 2004) Fifth Survey (Dec 2004) Sixth Survey (Mar 2005)Seventh Survey (J un 2005) Eighth Survey (Sept 2005) Ninth Survey (Dec 2005)Tenth Survey (Mar 2006) Eleventh Survey (J une 2006) Twelfth Survey (J une 2006)

10

Expected Percentage Increase in Housing Prices(Mean Value)

3.8

1.3

4.3

3.03.3

4.4

6.9 7.1 7.0

0.0

1.0

2.0

3.0

4.0

5.0

6.0

7.0

8.0

Homeowner Non-homeowner Overall

Per

cent

3 Months 1 Year 3 Years

11

Property Investment Rating

50

62.8

15.1

54.3

23

1.23.6

17.6

0.8

22.4

3.2

0

10

20

30

40

50

60

Very Good Good Neutral Bad Very Bad Don't know

Homeowner Non-homeowner

12

Expected Changes in Housing Prices in 3 Months

15.819.218.3

5.68.3

3.20.4 0.4

0.4

47.6

0.00.8

22.8

5.2

1.6 0.03.2

0.0

35.6

11.6

0.05.0

10.015.020.025.030.035.040.045.050.0

Above+20%

11% to20%

6% to10%

1% to5%

Same -1% to -5%

-6% to -10%

-11%to -20%

Above -20%

Don'tKnow

% o

f R

esponden

ts

Homeowner Non-homeowner

13

Current Level of Housing Prices

77

2

18.6

2.81.6

81.6

14.4

2

0

10

20

30

40

50

60

70

80

90

High & ExtremelyHigh

About Right Low & ExtremelyLow

Don't Know

% o

f Res

pode

nts

Homeowner Non-homeowner

14

Existing and Preferred Flat Size(Homeowner)

04

1.2

50.8

26.6

47.1

11.5

27.8

18.6

2

46.4

0

10

20

30

40

50

60

Type A (Up to429)

Type B (430-752)

Type C (753-1075)

Type D (1076-1720)

Type E (Over1720)

Not decided

% o

f R

esponden

t

Existing Flat Size Preferred Flat Size

15

Existing and Preferred Flat Size(Non-homeowner)

02 0.4

49.2

17.2

2

29.6

2

49.2

2

29.6

17.2

0

10

20

30

40

50

60

Type A (Up to429)

Type B (430-752)

Type C (753-1075)

Type D (1076-1720)

Type E (Over1720)

Not decided

% o

f R

esponden

t

Existing Flat Size Preferred Flat Size

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Factors Affecting Housing Decision(Homeowner)

0%

20%

40%

60%

80%

100%

Income Location InterestRate

Economic Developer Rental Land Sale Queue

Lev

el o

f Im

portan

ce

Important & Very Important NeutralNot Important & Not at all Important Don't Know

17

Factors Affecting Housing Decision(Non-homeowner)

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

Income Location InterestRate

Economic Rental Developer Land Sale Queue

Lev

el o

f Im

portan

ce

Important & Very Important NeutralNot Important & Not at all Important Don't Know

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Ranking of Factors

HO NHO

June Sept June SeptIncome 1 1 1 1

Location 2 2 3 2

Interest rate 3 3 2 3

Economic condition

4 4 4 4

Developer 5 5 6 6

Rental 6 6 5 5

Land sale 7 7 7 7

Queue 8 8 8 8

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Impact of Interest Rate Hike(% of Respondents)

HO NHO

Very significant 4.3 (12.4) 10.4 (13.7)

Significant 27.4 (33.2) 30.0 (26.6)

Neutral 25.8 (20.8) 26.0 (30.9)

Insignificant 27.4 (26.3) 23.6 (19.7)

Very insignificant 11.1 (5.2) 4.8 (2.6)

Don’t know 4.0 (2.1) 5.2 (6.5)

Total 100 (100) 100 (100)

Figures in ( ) are results of June 2006 Survey

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Timing to Buy a Real Property

7.5

78.4

0.82.8

17.5

71.4

15.6

1.20.8

4

0102030405060708090

3 months 6 months 1 year 3 years Don't know

% o

f Re

spo

nd

en

ts

Homeowner Non-homeowner

21

Forecast of Economic Conditions (% of Respondents)

3 Months 1 Year 3 Years

HO NHO HO NHO HO NHOBetter & Much Better

36.9

(34.6)

33.2

(41.6)

50.8 50.0 44.1 50.4

Same 53.2

(50.9)

57.2

(46.8)

27.8 32.0 8.3 14.8

Worse & Much Worse

6.7

(12.8)

8.0

(8.2)

9.9 11.2 12.3 14.4

Don’t Know 3.2 (1.7)

1.6 (3.4)

11.5 6.8 35.3 20.4

Total 100 100 100 100 100 100

Figures in ( ) are results of June 2006 Survey

22

Forecast of Family Income (% of Respondents)

3 Months 1 Year 3 Years

HO NHO HO NHO HO NHOGreatly & Somewhat Increase

19.8 (18.3)

20.4 (26.6)

44.4 45.6 48.0 59.6

Same 73.4 (74.8)

73.2 (64.4)

42.5 41.6 20.6 20.8

Greatly & Somewhat Decrease

4.4

(4.5)

4.8

(5.6)

5.6 6.4 6.4 5.6

Don’t Know 2.4

(2.4)

1.6

(3.4)

7.5 6.4 25.0 14.0

Total 100 100 100 100 100 100

Figures in ( ) are results of June 2006 Survey

23

Forecast of Job Opportunities (% of Respondents)

3 Months 1 Year 3 Years

HO NHO HO NHO HO NHOBetter & Much Better

18.2 (21.1)

21.6 (27.0)

23.8 37.2 30.9 41.6

Same 64.7

(62.3)

62.8 (57.5)

51.6 45.2 30.9 28.0

Worse & Much Worse

6.8

(6.2)

8.4

(7.3)

8.3 7.2 8.8 9.2

Don’t Know 10.3

(10.4)

7.2

(8.2)

16.3 10.4 29.4 21.2

Total 100 100 100 100 100 100

Figures in ( ) are results of June 2006 Survey

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Forecast of Ability to Buy a Property(% of Respondents)

3 Months 1 Year 3 Year

HO NHO HO NHO HO NHOBetter & Much Better

16.6 (14.6)

10.0 (18.5)

29.8 24.4 43.6 46.0

Same 72.6 (70.9)

76.8 (67.4)

54.8 62.0 25.8 36.4

Worse & Much Worse

6.8

(8.6)

10.4

(10.7)

6.3 9.2 6.4 8.4

Don’t Know 4.0

(5.9)

2.8

(3.4)

9.1 4.4 24.2 9.2

Total 100 100 100 100 100 100

Figures in ( ) are results of June 2006 Survey

25

Conclusions• Housing prices were expected to rise marginally in the short run following

the end of the interest rate up-cycle in August.• Housing in Hong Kong continued to be perceived as expensive. About 77%

of HOs and 83% of NHOs felt “somewhat too high” or “extremely high”.• Slightly half (HO:50%, NHO:58%) considered it was a “somewhat bad” or

“very bad” time to buy a real property.• About three-quarters (HO:71%, NHO:78%) had no idea when to buy. Only 4%

of HOs and 2% of NHOs planned to buy within six months.• The scale of impact of interest rate rises tended to be diminishing, 32% of

HOs (last survey:46%) and 40% of NHOs (last survey:40%) said the impact was “significant” or “very significant”. Yet the end of interest rate hikes does not seem to have much positive impact on the local market.

• Family income remained the most important factor affecting housing decision, as in previous surveys.

• Family income was expected to “greatly increase” or “increase somewhat” by 20% of respondents (last survey:22%).

• The market, in general, would remain largely positive in the fourth quarter of the year.

26

Next Two Surveys

• Dec 2006

• Mar 2007

RCCREE Website: 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

Q & A

Thank You

28

Investment Ratings (in percent)

Survey VeryGood Good Neutral Bad Very Bad DK

1 (Dec 03) 3.6 25.2 32.2 27.6 4.7 6.7

2 (Mar 04) 1.4 28 29.4 31.8 2.3 7.1

3 (Jun 04) 1.8 24 32.9 31.6 2.3 7.4

4 (Sep 04) 1.6 26.6 28.9 28.6 3.6 10.7

5 (Dec 04) 3.4 24.8 31.4 28 1.9 10.5

6 (Mar 05) 2.6 34.0 31.8 24.8 0.5 6.3

7 (Jun 05) 1.7 29.7 34.6 22.8 2.4 8.8

8 (Sep 05) 2.4 33.3 26.9 27.6 1.5 8.3

9 (Dec 05) 2.5 25.1 41.3 23.6 2.9 4.6

10 (Mar 06) 1.6 26.8 37.7 27.2 2.2 4.5

11 (Jun 06) 1.5 22.6 44.1 24.5 3.3 4.0

12 (Sept 06) 1.8 16.3 52.2 22.7 2.2 4.8

29

Good / Bad time to Buy a Property (in percent)

SurveyVeryGood Somewhat Good Somewhat Bad

Very Bad DK

1 (Dec 03) 6.7 43.1 31.4 3.8 15

2 (Mar 04) 1.8 41.8 36.6 3.2 16.6

3 (Jun 04) 2.7 38.2 44.8 2.9 11.4

4 (Sep 04) 2.1 39.6 39.8 2.9 15.6

5 (Dec 04) 3.4 34.3 45.5 2.5 14.3

6 (Mar 05) 2.7 42.2 40.3 2.9 11.9

7 (Jun 05) 2.2 36.0 47.8 1.7 12.3

8 (Sep 05) 1.3 29.7 49.8 4.0 15.2

9 (Dec 05) 1.5 28.4 54.5 6.0 9.6

10 (Mar 06) 1.1 22.9 55.3 4.1 16.6

11 (Jun 06) 0.8 28.0 56.3 9.7 5.2

30

Current Housing Prices (in percent)

SurveyExtremely

HighSomewhat too

HighAbout Right

Somewhat too Low Extremely Low DK

1 (Dec 03) 9.1 32.6 37.8 9 2.1 9.4

2 (Mar 04) 15.4 35.7 33.8 5.7 0.2 9.2

3 (Jun 04) 17.5 33.2 36.6 4.3 0.4 8

4 (Sep 04) 16.9 40.4 32.1 3.9 1 5.7

5 (Dec 04) 19.2 37.9 27.8 1.7 0.8 12.6

6 (Mar 05) 19.7 41.5 26.9 5.1 0.5 6.3

7 (Jun 05) 23.0 40.7 28.8 1.7 0.2 5.6

8 (Sep 05) 25.7 42.1 22.2 1.1 0.4 8.5

9 (Dec 05) 26.9 46.3 16.3 2.5 0.6 7.3

10 (Mar 06) 34.1 43.9 17.3 1.3 0.2 3.2

11 (Jun 06) 36.4 45.0 15.2 1.1 0.6 1.7

31

Expected Housing Prices in Next 3 Months (in percent)

Survey Rise Fall Same DK

1 (Dec03) 42.9 6.8 27.2 23.1

2 (Mar04) 64.3 4.5 16.4 14.8

3 (Jun04) 36.7 8.8 43.1 11.4

4 (Sep04) 49 1.8 32.8 16.4

5 (Dec04) 52.6 3.4 26.1 17.9

6 (Mar 05) 56.8 2.2 21.8 19.2

7 (Jun 05) 32.9 7.8 10.5 48.8

8 (Sep 05) 47.9 9.2 26.4 16.5

9 (Dec 05) 30.5 30.3 22.5 16.7

10 (Mar 06) 32.1 18.2 36.2 13.5

11 (Jun 06) 29.1 27.2 30.1 13.6

12 (Sep 06) 32.7 13.1 41.6 12.5

32

Expected Housing Prices in Next 3 Months (in percent)

　

1 (Dec 03)

2 (Mar 04)

3 (Jun 04)

4 (Sep 04)

5 (Dec 04)

6 (Mar 05)

7 (Jun 05)

8 (Sep 05)

9 (Dec 05)

10 (Mar 06)

11 (Jun 06)

12 (Sep 06)

Above +20% 0 1.9 1.1 1.5 3.2 0 1.7 1.1 1.4 0.4 1.0

0.8

+11% to

+20% 7.5 6.2 4.7 2.5 4.4 2.94.2 4.1 1.0 1.8 2.4 2.2

+6% to +10% 19.8 24.1 18.7 22.4 17.7 24.3 16.0 14.6 9.3 12.2 9.9 18.7

+0.1% to +5% 57.6 50.8 44.3 63.5 49.4 60.1 34.9 42.7 29.2 41.1 29.9 44.8

-0.1% to -5% 10.3 2.7 7.8 1.5 2.5 2.0 12.2 9.4 29.2 26.8 29.3 14.8

-6% to -10% 3.4 1.9 4.2 0.5 0.6 1.2 9.2 3.0 11.7 4.7 12.9 7.0

-11% to -20% 0 0 3.1 0 0 0

2.5 0.7 1.0 0.8 1.7 0.4

Above -20% 0 0 1 0 0 0 0.4 0 0.3 0.4 1.0 0.4

Don't Know 1.4 12.4 15.1 8.1 22.2 9.5 18.9 24.4 16.9 11.8 11.9 10.9

33

Expected Changes in Housing Prices in Next 3 Months (in percent)

SurveyNo 1 2 3 4 5 6 7 8 9 10 11 12

Survey Date

Dec 03

Mar 04

Jun 04

Sep 04

Dec 04

Mar 05

Jun 05

Sep 05

Dec 05

Mar 06

Jun 06

Sep 06

Mean Value 3.75 6.73 3.63 6.23 7.07 5.62 3.23 4.50 0.24 1.44 -0.5 2.95

34

Price Indices (1999=100) – Private Domestic

Survey A B C D E Overall

1 (Dec 03) 63.2 64.4 70.0 79.1 85.6 65.4

2 (Mar 04) 72.9 77.1 89.0 96.0 102.9 98.1

3 (Jun 04) 69.7 73.9 83.2 92.1 106.3 74.7

4 (Sep 04) 74.7 80.5 91.2 100.3 113.8 80.9

5 (Dec 04) 76.4 82.6 94.1 107.9 120.8 83.3

6 (Mar 05) 87.6 94.0 108.7 118.7 125.9 94.6

7 (Jun 05) 85.9 91.8 108.4 121.4 131.2 92.9

8 (Sep 05) 86.7 93.3 109.9 121.6 138.2 94.0

9 (Dec 05) 82.3 87.0 120.1 118.3 133.2 88.1

10 (Mar 06) 86.6 91.8 108.3 119.0 137.3 92.6

11 (Jun 06)* 85.2 89.6 106.9 119.7 140.6 91.0

* Provisional figures. Sources: Rating and Valuation Department, HKSAR.

35

Preferred Flat Type

12 10.48.7

1.6

27.0

10.3

2.8

49.6

9.2

0.8

48.4

19.2

0

10

20

30

40

50

60

Primaryprivate

housing

Secondaryprivate

housing

Villagehousing

HOS / PSPS Other No comment

% o

f R

espo

nden

ts

Homeowner Non-homeowner

36

Preferred Location

N.T.22%

Not decided14%

Other7%

Kowloon19%

China1%

HK & Islands37%