1 BRE Confidence Index for Residential Property (2005:Q1, March 2005) Presenter: Dr. Eddie C. M. Hui...

1

BRE Confidence Index forResidential Property

(2005:Q1, March 2005)

Presenter: Dr. Eddie C. M. Hui

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

30 March 2005

© The Hong Kong Polytechnic University 2005. All Rights Reserved.

2

Project Team & Collaborators

Hong Kong Polytechnic University

Hong Kong Baptist University

Texas A&M University, USA

University of Cambridge, UK

3

Uniqueness of BRE 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

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 e

veryday Chinese• Rating scale: 5-Point Likert scale• Sample size: Randomized and anonymous sample of 23,000 telephon

e numbers per survey• Successful interviews: Aim at 1,000 per survey• Pilot: Trial study before full-scale surveys• Interviewers: Independent and trained university students under clos

e supervision• Index Computation: Based on non-equal weighted confidence score

s of price expectations and sentimental questions• Software used: Computer-Assisted Telephone Interviewing (CATI) a

nd 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

Composition of Respondents(2005:Q1, March 2005)

A110%

A29%

A332%

B29%

B331%

B19%

A1 A2 A3 B1 B2 B3

7

Surveys Conducted

Dates Valid Samples

Completed 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

8

BRE Index (0-1000)

579 556 564581

513556

620587 603

685 692 688690 686 688692 699 695

0

100

200

300

400

500

600

700

800

Homeowner Non-homeowner Overall Group

BR

E In

dex

First Survey (Dec 2003) Second Survey (Mar 2004)Third Survey (Jun 2004) Fourth Survey (Sept 2004)Fifth Survey (Dec 2004) Sixth Survey (Mar 2005)

9

BRE Indices (Overall) and Property Price Indices (All Classes)

0

100

200

300

400

500

600

700

800

BR

E In

dex

(Ove

rall)

0

10

20

30

40

50

60

70

80

90

Pro

perty

Pric

e In

dex

(All

Cla

sses

)

BRE Index (Overall) Property Price Index (All Classes)

10

BRE Indices (Overall) and Property Price Indices (All Classes) with Price Index Lag = 3 Months

0

100

200

300

400

500

600

700

800

BR

E I

ndex

(O

vera

ll)

010

2030

4050

6070

8090

Pro

eprt

y P

rice

Ind

ex (

All

Cla

sses

)

BRE Index (Overall) Property Price Index (All Classes)

Lag 3 months

11

Expected Increase in Housing Prices (Mean Value)

5.7 5.51 5.62

7.016.2

6.82

10.06

8.079.09

0

2

4

6

8

10

12

Homeowner Non-homeowner Overall

3 Months 1 Year 3 Years

12

Property Investment Rating

3.8

37.7

31.6

0.53.8

1.5

3032

27

0.5

9

22.6

0

5

10

15

20

25

30

35

40

Very Good Good Neutral Bad Very Bad Don't know

% o

f R

espo

nden

ts

Homeowner Non-homeowner

13

Expected Changes in Housing Prices in 3 Months

0.0 0.5

23.0

5.01.0 0.0

39.0

58.0

25.2

0.5 0.0 0.0

20.7

3.50.0

63.0

2.02.0

0.0

10.0

20.0

30.0

40.0

50.0

60.0

70.0

Above+20%

11% to20%

6% to10%

1% to 5% -1% to -5%

-6% to -10%

-11% to -20%

Above -20%

Don'tKnow

% o

f R

esponden

ts


14

Expected Price Change (%) before and after Tung’s Resignation on 10 March 2005

Survey Date

8 Mar 9 Mar 11 Mar 12 Mar 13 Mar Overall

Mean 5.95 4.86 6.36 5.57 4.93 5.62

Mode 10.0 5.0 5.0 5.0 5.0 5.00

St. Dev. 4.16 4.24 3.86 4.10 4.35 4.09

Before Resignation After Resignation

15

Current Level of Housing Prices

52.3

32.5

8.9 6.1

21

26.5

70.5

0

10

20

30

40

50

60

70

80

High & Extremely High About Right Low & Extremely Low Don't Know

% o

f Res

pode

nts


16

Existing and Preferred Flat Size (sq. ft.)(Homeowner)

8.5

50

33

7.1

1.41.4

29.7

49.6

14.6

4.7

0

10

20

30

40

50

60

Type A (Up to 429) Type B (430-752) Type C (753-1075) Type D (1076-1720) Type E (Over 1720)

% o

f R

esponden

t

Existing Flat Size Preferred Flat Size

17

Existing and Preferred Flat Size (sq. ft.)(Non-Homeowner)

29

50.5

15

4.51

7

53

34.5

41.5

0

10

20

30

40

50

60

Type A (Up to 429) Type B (430-752) Type C (753-1075) Type D (1076-1720) Type E (Over 1720)

% o

f R

esponden

t

Existing Flat Size Preferred Flat Size

18

Weighted Average of Existing and Preferred Flat Size (sq. ft.)

2004 Dec Survey 2005 March Survey

Existing Preferred Existing Preferred

Homeowner 733 916 756 920

Non-home owner

664 799 640 740

19

Factors Affecting Housing Decision(Homeowner)

0%10%20%30%40%50%60%70%80%90%

100%

Income Location EconomicCondition

InterestRate

Developer Rental Land Sale Queue

Lev

el o

f Im

portan

ce

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

20

Factors Affecting Housing Decision(Non-homeowner)

0%10%20%30%40%50%60%70%80%90%

100%

Income Location EconomicCondition

InterestRate

Rental Developer Land Sale Queue

Lev

el o

f Im

port

ance

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

21

Timing to Buy a Real Property

3.8 3.89.4 12.7

70.3

1.5 28 9.5

79

0

20

40

60

80

100

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

% o

f Res

pond

ents


22

Forecast of Economic Conditions (% of Respondents)


HO NHO HO NHO HO NHO

Better & Much Better

52.3 49.5 68.0 66.5 44.9 51.0

Same 35.4 45.5 13.2 20.0 9.9 8.5

Worse & Much Worse

4.7 2.5 7.0 4.0 3.7 5.0

Don’t Know 7.6 2.5 11.8 9.5 41.5 35.5

Total 100 100 100 100 100 100

23

Forecast of Family Income (% of Respondents)



Greatly & Somewhat Increase

25.0 24.5 41.6 46.5 47.6 50.5

Same 69.3 65.5 43.9 39.0 17.4 13.0Greatly & Somewhat Decrease

3.3 6.5 3.7 4.5 4.3 4.0

Don’t Know 2.4 3.5 10.8 10.0 30.7 32.5Total 100 100 100 100 100 100

24

Forecast of Job Opportunities (% of Respondents)




23.6 25.0 34.4 36.0 28.3 35.5

Same 57.5 50.5 43.4 35.5 25.9 20.0

Worse & Much Worse

5.7 7.5 5.2 6.0 6.6 5.0

Don’t Know 13.2 17.0 17.0 22.5 39.2 39.5

Total 100 100 100 100 100 100

25

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

3 Months 1 Year 3 Year



24.6 17 31.6 28.5 38.6 44.0

Same 64.6 65 49.0 49.0 25.9 23.5

Worse & Much Worse

4.2 10.0 3.8 7.5 2.9 9.0

Don’t Know 6.6 8.0 15.6 15.0 32.6 23.5

Total 100 100 100 100 100 100

26

Conclusions

• Consumer confidence on property markets continues to rise moderately.

• The price level of housing is considered somewhat too high by the majority of people, following the same pattern of previous surveys.

• Yet housing prices were expected to increase marginally by an average of 5.6% in the next three months.

• Household income was cited the most important factor affecting housing decision. A majority of respondents rated interest rate as “important” and “very important”.

• Economic conditions were expected to be “better” or “much better” in three months by about half respondents; job prospect and household income by one-quarter.

• There appears to be a judicious blend of optimism and caution, with housing consumers paying close attention to the possible rise in interest rates.

27

Next Two Surveys

• June 2005

• Sept 2005

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

http://www.bre.polyu.edu.hk/rccree/index.htm

http://www.bre.polyu.edu.hk/rccree/index.htm

28

Q & A

Thank You

29

Additional Information

Investment Ratings (in percent)

SurveyNo

VeryGood Good Neutral Bad Very Bad DK

Total

1 (Dec03) 3.6 25.2 32.2 27.6 4.7 6.7 100

2 (Mar04) 1.4 28 29.4 31.8 2.3 7.1 100

3 (Jun04) 1.8 24 32.9 31.6 2.3 7.4 100

4 (Sep04) 1.6 26.6 28.9 28.6 3.6 10.7 100

5 (Dec04) 3.4 24.8 31.4 28 1.9 10.5 100

6 (Mar 05) 2.6 34.0 31.8 24.8 0.5 6.3 100

30


Investment Ratings

0

5

10

15

20

25

30

35

40

Very Good Good Neutral Bad Very Bad DK

1 (Dec 03) 2 (Mar 04) 3 (Jun 04) 4 (Sep 04) 5 (Dec 04) 6 (Mar 05)

31


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

SurveyNo

VeryGood

Somewhat Good

Somewhat Bad

Very Bad DK Total

1 (Dec03) 6.7 43.1 31.4 3.8 15 100

2 (Mar04) 1.8 41.8 36.6 3.2 16.6 100

3 (Jun04) 2.7 38.2 44.8 2.9 11.4 100

4 (Sep04) 2.1 39.6 39.8 2.9 15.6 100

5 (Dec04) 3.4 34.3 45.5 2.5 14.3 100

6 (Mar 05) 2.7 42.2 40.3 2.9 11.9 100

32


Good / Bad Time to Buy A Property

0

10

20

30

40

50


Very Good Somewhat Good Somewhat Bad Very Bad DK

33


Current Housing Prices (in percent)

SurveyNo

Extremely High

Somewhat too High

About Right

Somewhat too Low

Extremely Low DK Total

1 (Dec03) 9.1 32.6 37.8 9 2.1 9.4 100

2 (Mar04) 15.4 35.7 33.8 5.7 0.2 9.2 100

3 (Jun04) 17.5 33.2 36.6 4.3 0.4 8 100

4 (Sep04) 16.9 40.4 32.1 3.9 1 5.7 100

5 (Dec04) 19.2 37.9 27.8 1.7 0.8 12.6 100

6 (Mar 05) 19.7 41.5 26.9 5.1 0.5 6.3 100

34


Current Housing Prices

0

5

10

15

20

25

30

35

40

45

Extremely High Somewhat too

High

About Right Somewhat too

Low

Extremely Low DK


35


Expected Housing Prices in 3 Months (in percent)

SurveyNo Rise Fall Same DK Total

1 (Dec03) 42.9 6.8 27.2 23.1 100

2 (Mar04) 64.3 4.5 16.4 14.8 100

3 (Jun04) 36.7 8.8 43.1 11.4 100

4 (Sep04) 49 1.8 32.8 16.4 100

5 (Dec04) 52.6 3.4 26.1 17.9 100

6 (Mar 05) 56.8 2.2 21.8 19.2 100

36


Expected Housing Prices in 3 Months

0

10

20

30

40

50

60

70


Rise Fall Same DK

37

Additional InformationExpected Housing Prices in 3 Months (in percent)

1 (Dec03) 2 (Mar04) 3 (Jun04) 4 (Sep04) 5 (Dec04) 6 (Mar 05)

Above +20% 0 1.9 1.1 1.5 3.2 0

+11% to +20% 7.5 6.2 4.7 2.5 4.4 2.9

+6% to +10% 19.8 24.1 18.7 22.4 17.7 24.3

+1% to +5% 57.6 50.8 44.3 63.5 49.4 60.1

-1% to -5% 10.3 2.7 7.8 1.5 2.5 2.0

-6% to -10% 3.4 1.9 4.2 0.5 0.6 1.2

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

Above -20% 0 0 1 0 0 0

Don't Know 1.4 12.4 15.1 8.1 22.2 9.5

Total 100 100 100 100 100 100

38


Expected Percentage Changes in Housing Prices in 3 Months

0

10

20

30

40

50

60

70

Above +20% +11% to +20% +6% to +10% +1% to +5% -1% to -5% -6% to -10% -11% to -20% Above -20% DK


39


Expected Changes in Housing Prices in 3 months (in percent)

SurveyNo 1 2 3 4 5 6

Survey Date Dec 03 Mar 04 Jun 04 Sep 04 Dec 04 Mar 05

Mean Value 3.75 6.73 3.63 6.23 7.07 5.62

41

Housing affordability

25

35

45

55

03q4 04q1 04q2 04q3 04q4 05q1

(97Q2=100)

housingaffordability70%mortgage

housingaffordability95%mortgage

after increaseof 5% ofincome

afterincrease of5% ofincome

1 BRE Confidence Index for Residential Property (2005:Q1, March 2005) Presenter: Dr. Eddie C. M. Hui...

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