bre confidence index for residential property (2005:q2, june 2005) presenter: prof. eddie c. m. hui...
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BRE Confidence Index forResidential Property
(2005:Q2, June 2005)
Presenter: Prof. Eddie C. M. Hui
Research Centre for Construction and Real Estate EconomicsThe Hong Kong Polytechnic University
29 June 2005
© The Hong Kong Polytechnic University 2005. All Rights Reserved.
Project Team
Hong Kong Polytechnic University
Hong Kong Baptist University
Texas A&M University, USA
University of Cambridge, UK
Collaborators
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
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: 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 cl
ose supervision• Index computation: Based on non-equal weighted confidence scores
of price expectations and sentimental questions• Software used: Computer-Assisted Telephone Interviewing (CATI) a
nd Statistical Package for the Social Sciences (SPSS)
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
Components of BRE Index
1. Investment rating2. Timing to buy3. Current housing prices4. Expected housing price changes5. Economic conditions6. Job opportunities7. Family income8. Affordability of home purchase
Composition of Respondents(2005:Q2, June 2005)
B2
8%
B3
30.5%
A3
33%
A2
8.6%
A1
8.4%
B1
11.5%
A1 A2 A3 B1 B2 B3
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
June 2005 7,476 1,120 14.98
BRE Index (0-1000)
513556587 603564556579 581620
688692685 688686690695699692 708714702
0100200300400500600700800
Homeowner Non-homeowner Overall
BRE 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)
Expected Percentage Changes in Housing Prices(Mean Value)
1.7
4.4
5.9
9.510.5
3.2
6.65.3
11.3
0
2
4
6
8
10
12
Homeowner Non-homeowner Overall
% o
f Cha
nges
3 Months 1 Year 3 Years
Property Investment Rating
0.5
7.4
2.6
31.4
20.4
37.7
24.9
10.1
2.32.8
28.131.8
0
5
10
15
20
25
30
35
40
Very Good Good Neutral Bad Very Bad Don't know
% o
f Res
pond
ents
Homeowner Non-homeowner
Expected Changes in Housing Prices in 3 Months
0.0
19.3 20.0
2.9
30.1
19.4 20.4
3.91.0
17.5
4.9
13.3
0.01.53.0
38.5
0.73.7
0.0
5.0
10.0
15.0
20.0
25.0
30.0
35.0
40.0
45.0
Above+20%
11% to20%
6% to10%
1% to5%
-1% to -5%
-6% to -10%
-11% to -20%
Above -20%
Don'tKnow
% o
f Res
ponden
ts
Homeowner Non-homeowner
Current Level of Housing Prices
2.16.3
23
1.9 5.1
56.5
35.1
70
0
10
20
3040
50
60
70
80
High & ExtremelyHigh
About Right Low & ExtremelyLow
Don't Know
% o
f R
esp
od
en
ts
Homeowner Non-homeowner
Existing and Preferred Flat Size in Sq. Ft.(Homeowner)
7.9
33
11
12.6
29.3
50.8
13.1
4.2
47.1
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
ts
Existing Flat Size Preferred Flat Size
Existing and Preferred Flat Size in Sq. Ft.(Non-Homeowner)
47.9
19.8
1.4
52.1
2.3
24.9
6
34.6
5.55.5
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
ts
Existing Flat Size Preferred Flat Size
Factors Affecting Housing Decision(Homeowner)
0%
20%
40%
60%
80%
100%
Income EconomicCondition
Location InterestRate
Developer Rental Land Sale Queue
% o
f R
esponden
ts
Important & Very Important NeutralNot Important & Not at all Important Don't Know
Factors Affecting Housing Decision(Non-homeowner)
0%10%20%30%40%50%60%70%80%90%
100%
Income EconomicCondition
Location InterestRate
Rental Developer Land Sale Queue
% o
f R
esponden
ts
Important & Very Important NeutralNot Important & Not at all Important Don't Know
Impact of Interest Rate Hike(% of Respondents)
HO NHO
Very significant 3.1 0.5
Significant 13.6 16.6
Neutral 15.7 21.2
Insignificant 49.7 39.6
Very insignificant 12.1 7.8
Don’t know 5.8 14.3
Total 100 100
Timing to Buy a Real Property
18.3
0.5
20.7
4.23.13.7
70.765
10.13.7
0
10
20
30
40
50
60
70
80
3 months 6 months 1 year 3 years Don't know
% o
f Res
pond
ents
Homeowner Non-homeowner
Existence of a “Bubble”?(% of Respondents)
HO NHO
Agree 42.9 52.6
Disagree 44.0 33.6
Don’t know 13.1 13.8
Total 100 100
Forecast of Economic Conditions (% of Respondents)
3 Months 1 Year 3 Years
HO NHO HO NHO HO NHO
Better & Much Better
56.0 47.5 67.5 62.7 49.8 51.1
Same 37.7 44.2 15.7 21.7 8.4 13.4
Worse & Much Worse
3.7 6.0 4.2 6.0 2.6 4.1
Don’t Know 2.6 2.3 12.6 9.6 39.2 31.4
Total 100 100 100 100 100 100
Forecast of Family Income (% of Respondents)
3 Months 1 Year 3 Years
HO NHO HO NHO HO NHO
Greatly & Somewhat Increase
20.9 23.9 41.4 48.9 41.9 52.1
Same 73.8 68.7 45.5 36.9 22.0 21.2Greatly & Somewhat Decrease
3.7 4.6 4.7 2.8 7.3 1.8
Don’t Know 1.6 2.8 8.4 11.4 28.8 24.9Total 100 100 100 100 100 100
Forecast of Job Opportunities (% of Respondents)
3 Months 1 Year 3 Years
HO NHO HO NHO HO NHO
Better & Much Better
18.9 24.0 29.3 35.5 26.1 35.9
Same 67.0 52.5 51.8 35.5 34.6 17.6
Worse & Much Worse
5.8 5.5 5.8 5.5 4.7 5.5
Don’t Know 8.3 18.0 13.1 23.5 34.6 41.0
Total 100 100 100 100 100 100
Forecast of Ability to Buy a Property(% of Respondents)
3 Months 1 Year 3 Year
HO NHO HO NHO HO NHO
Better & Much Better
15.7 12.4 30.4 30.8 39.3 46.6
Same 69.1 72.4 54.5 51.6 27.8 23.0
Worse & Much Worse
7.3 7.4 5.7 4.2 5.7 3.2
Don’t Know 7.9 7.8 9.4 13.4 27.2 27.2
Total 100 100 100 100 100 100
Conclusions
• Public confidence in property market remained positive – despite recent increases in the interest rates.
• Housing prices were expected to increase very marginally, but the incentive to buy was still fragile. This negative attitude towards spending was expected to continue in the immediate future.
• Similar to past findings, in order of importance, family income, economic conditions and location were three most important factors affecting housing decision.
• The impact of recent interest rate hike on housing price expectations was potentially “insignificant”.
• The movements in housing prices would be affected mainly by the interest rate outlook.
• The increase in speculative demand for housing was of concern. The market was likely in a “bubble”, suggesting a greater risk of overheating in the market, in particular, in the upper market.
• Unless the increase in the interest rates is beyond peoples’ expectations, the market would remain stable in the foreseeable future.
Next Two Surveys
• Sept 2005
• Dec 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
Q & A
Thank You
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
7 (Jun 05) 1.7 29.7 34.6 22.8 2.4 8.8 100
Additional Information
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
7 (Jun 05) 2.2 36.0 47.8 1.7 12.3 100
Additional Information
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
7 (Jun 05) 23.0 40.7 28.8 1.7 0.2 5.6 100
Additional Information
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
7 (Jun 05) 32.9 7.8 10.5 48.8 100
Additional InformationExpected Housing Prices in 3 Months (in percent)
1
(Dec03) 2 (Mar04) 3 (Jun04) 4 (Sep04) 5 (Dec04) 6 (Mar 05) 7 (Jun 05)
Above +20% 0 1.9 1.1 1.5 3.2 0 1.7
+11% to +20% 7.5 6.2 4.7 2.5 4.4 2.9 4.2
+6% to +10% 19.8 24.1 18.7 22.4 17.7 24.3 16.0
+1% to +5% 57.6 50.8 44.3 63.5 49.4 60.1 34.9
-1% to -5% 10.3 2.7 7.8 1.5 2.5 2.0 12.2
-6% to -10% 3.4 1.9 4.2 0.5 0.6 1.2 9.2
-11% to -20% 0 0 3.1 0 0 0 2.5
Above -20% 0 0 1 0 0 0 0.4
Don't Know 1.4 12.4 15.1 8.1 22.2 9.5 18.9
Total 100 100 100 100 100 100 100
Additional Information
Expected Changes in Housing Prices (in percent)
SurveyNo 1 2 3 4 5 6 7
Survey Date Dec 03 Mar 04 Jun 04 Sep 04 Dec 04 Mar 05 Jun 05
Mean Value 3.75 6.73 3.63 6.23 7.07 5.62 3.23
Best Lending Rate and S&P Agreement
4.6
4.8
5
5.2
5.4
5.6
5.8
6
Jan-04
Feb-04
Mar-04
Apr-04
May-04
Jun-04
Jul-04
Aug-04
Sep-04
Oct-04
Nov-04
Dec-04
Jan-05
Feb-05
Mar-05
Apr-05
May-05
BL
R (
% p
.a.)
0
2000
4000
6000
8000
10000
12000
14000
16000
Num
ber
of S
&P
BLR S&P
No. of S&P by Range of Consideration
0
500
1000
1500
2000
2500
3000
Jan-04
Feb-04
Mar-04
Apr-04
May-04
Jun-04
Jul-04
Aug-04
Sep-04
Oct-04
Nov-04
Dec-04
Jan-05
Feb-05
Mar-05
Apr-05
May-05
No.
of S
&P
($2m
- 3m
)
0
100
200
300
400
500
600
700
800
900
1000
No.
of S
&P
($10
m &
ove
r)
$2m - $3m $10m & over
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