1. 1 BRE Confidence Index for Residential Property (September 2006 Survey) Presenter: Prof. Eddie C. M. Hui Research Centre for Construction and Real Estate Economics The Hong Kong Polytechnic University 4 October 2006 © The Hong Kong Polytechnic University 2006. All Rights Reserved.

2. 2 Project Teams 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 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. 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. 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 (Sept 2006 Survey)

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 20055,8931,02917.46 Dec 20056,1531,00716.37 Mar 20066,5371,05616.15 June 20067,1651,03414.43 Sept 20067,1251,00814.15

9. 9 BRE Index (0-1000)

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18. 18 Ranking of Factors HONHO JuneSeptJuneSept Income1111 Location2232 Interest rate3323 Economic condition 4444 Developer5566 Rental6655 Land sale7777 Queue8888

19. 19 Impact of Interest Rate Hike (% of Respondents) HONHO Very significant4.3 (12.4)10.4 (13.7) Significant27.4 (33.2)30.0 (26.6) Neutral25.8 (20.8)26.0 (30.9) Insignificant27.4 (26.3)23.6 (19.7) Very insignificant11.1 (5.2)4.8 (2.6) Don’t know4.0 (2.1)5.2 (6.5) Total100 (100) Figures in ( ) are results of June 2006 Survey

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21. 21 Forecast of Economic Conditions (% of Respondents) 3 Months1 Year3 Years HONHOHONHOHONHO Better & Much Better 36.9 (34.6) 33.2 (41.6) 50.850.044.150.4 Same53.2 (50.9) 57.2 (46.8) 27.832.08.314.8 Worse & Much Worse 6.7 (12.8) 8.0 (8.2) 9.911.212.314.4 Don’t Know3.2 (1.7) 1.6 (3.4) 11.56.835.320.4 Total100 Figures in ( ) are results of June 2006 Survey

22. 22 Forecast of Family Income (% of Respondents) 3 Months1 Year3 Years HONHOHONHOHONHO Greatly & Somewhat Increase 19.8 (18.3) 20.4 (26.6) 44.445.648.059.6 Same 73.4 (74.8) 73.2 (64.4) 42.541.620.620.8 Greatly & Somewhat Decrease 4.4 (4.5) 4.8 (5.6) 5.66.4 5.6 Don’t Know 2.4 (2.4) 1.6 (3.4) 7.56.425.014.0 Total 100 Figures in ( ) are results of June 2006 Survey

23. 23 Forecast of Job Opportunities (% of Respondents) 3 Months1 Year3 Years HONHOHONHOHONHO Better & Much Better 18.2 (21.1) 21.6 (27.0) 23.837.230.941.6 Same 64.7 (62.3) 62.8 (57.5) 51.645.230.928.0 Worse & Much Worse 6.8 (6.2) 8.4 (7.3) 8.37.28.89.2 Don’t Know 10.3 (10.4) 7.2 (8.2) 16.310.429.421.2 Total 100 Figures in ( ) are results of June 2006 Survey

24. 24 Forecast of Ability to Buy a Property (% of Respondents) 3 Months1 Year3 Year HONHOHONHOHONHO Better & Much Better 16.6 (14.6) 10.0 (18.5) 29.824.443.646.0 Same 72.6 (70.9) 76.8 (67.4) 54.862.025.836.4 Worse & Much Worse 6.8 (8.6) 10.4 (10.7) 6.39.26.48.4 Don’t Know 4.0 (5.9) 2.8 (3.4) 9.14.424.29.2 Total 100 Figures in ( ) are results of June 2006 Survey

25. 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. 26 Next Two Surveys Dec 2006 Mar 2007 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 Very Good NeutralBadVery BadDK 1 (Dec 03)3.625.232.227.64.76.7 2 (Mar 04)1.42829.431.82.37.1 3 (Jun 04)1.82432.931.62.37.4 4 (Sep 04)1.626.628.928.63.610.7 5 (Dec 04)3.424.831.4281.910.5 6 (Mar 05)2.634.031.824.80.56.3 7 (Jun 05)1.729.734.622.82.48.8 8 (Sep 05)2.433.326.927.61.58.3 9 (Dec 05)2.525.141.323.62.94.6 10 (Mar 06)1.626.837.727.22.24.5 11 (Jun 06)1.522.644.124.53.34.0 12 (Sept 06)1.816.352.222.72.24.8

29. 29 Good / Bad time to Buy a Property (in percent) Survey Very GoodSomewhat GoodSomewhat Bad Very BadDK 1 (Dec 03)6.743.131.43.815 2 (Mar 04)1.841.836.63.216.6 3 (Jun 04)2.738.244.82.911.4 4 (Sep 04)2.139.639.82.915.6 5 (Dec 04)3.434.345.52.514.3 6 (Mar 05)2.742.240.32.911.9 7 (Jun 05)2.236.047.81.712.3 8 (Sep 05)1.329.749.84.015.2 9 (Dec 05)1.528.454.56.09.6 10 (Mar 06)1.122.955.34.116.6 11 (Jun 06)0.828.056.39.75.2

30. 30 Current Housing Prices (in percent) Survey Extremely High Somewhat too High About Right Somewhat too LowExtremely LowDK 1 (Dec 03)9.132.637.892.19.4 2 (Mar 04)15.435.733.85.70.29.2 3 (Jun 04)17.533.236.64.30.48 4 (Sep 04)16.940.432.13.915.7 5 (Dec 04)19.237.927.81.70.812.6 6 (Mar 05)19.741.526.95.10.56.3 7 (Jun 05)23.040.728.81.70.25.6 8 (Sep 05)25.742.122.21.10.48.5 9 (Dec 05)26.946.316.32.50.67.3 10 (Mar 06)34.143.917.31.30.23.2 11 (Jun 06)36.445.015.21.10.61.7

31. 31 Expected Housing Prices in Next 3 Months (in percent) SurveyRiseFallSameDK 1 (Dec03)42.96.827.223.1 2 (Mar04)64.34.516.414.8 3 (Jun04)36.78.843.111.4 4 (Sep04)491.832.816.4 5 (Dec04)52.63.426.117.9 6 (Mar 05)56.82.221.819.2 7 (Jun 05)32.97.810.548.8 8 (Sep 05)47.99.226.416.5 9 (Dec 05)30.530.322.516.7 10 (Mar 06)32.118.236.213.5 11 (Jun 06)29.127.230.113.6 12 (Sep 06)32.713.141.612.5

32. 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%01.91.11.53.20 1.71.11.40.41.0 0.8 +11% to +20%7.56.24.72.54.42.9 4.24.11.01.82.42.2 +6% to +10%19.824.118.722.417.724.3 16.014.69.312.29.918.7 +0.1% to +5%57.650.844.363.549.460.1 34.942.729.241.129.944.8 -0.1% to -5%10.32.77.81.52.52.0 12.29.429.226.829.314.8 -6% to -10%3.41.94.20.50.61.2 9.23.011.74.712.97.0 -11% to - 20%003.1000 2.50.71.00.81.70.4 Above -20%001000 0.400.30.41.00.4 Don't Know1.412.415.18.122.29.5 18.924.416.911.811.910.9

33. 33 Expected Changes in Housing Prices in Next 3 Months (in percent) Survey No123456789101112 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 Value3.756.733.636.237.075.623.234.500.241.44-0.52.95

34. 34 Price Indices (1999=100) – Private Domestic SurveyABCDEOverall 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)85.991.8108.4121.4131.292.9 8 (Sep 05)86.793.3109.9121.6138.294.0 9 (Dec 05)82.387.0120.1118.3133.288.1 10 (Mar 06)86.691.8108.3119.0137.392.6 11 (Jun 06)*85.289.6106.9119.7140.691.0 * Provisional figures. Sources: Rating and Valuation Department, HKSAR.

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36. 36 Preferred Location