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Home buyers deeply pessimistic

In sharp contrast to land developers' enthusiasm, the nation's home buyers were deeply pessimistic about the real estate market's prospects during the final quarter of last year, with the property price confidence index plumbing new depths, the results of a survey showed yesterday.

The index for the fourth quarter dropped to 83 points -- a five point decline from the July-to-September period and the lowest since the second quarter of 2002, when the formerly government-affiliated Institute for Physical Planning and Information launched the quarterly survey.

"With property prices soaring, many would-be homeowners, who have long felt they cannot afford their ideal homes, became even more conservative and pessimistic," said Chang Chin-oh (張金鶚), professor of land economics at National Chengchi University.

Using a scale from zero to 200, the confidence index measures real-estate sentiment. One hundred points indicates a neutral outlook and the highest level of 131 points was registered in the first quarter of 2004, ahead of that year's presidential election.

Consumer sentiment differs significantly from that of developers, most of whom have recently expressed upbeat views about the market's post-election prospects and have geared up to invest heavily in housing projects.

Chang said that further price increases would be the result of speculation by profit-seeking property investors, rather than home buyers investing their life savings in residences.

"Don't underestimate the consumer's expectation for property prices to decline," Chang said.

A US investment banker, who refused to be identified, agreed with Chang yesterday. He said there was little reason to be excited about the local property market because more than 80 percent of the nation's households own a house.

"The recent property boom is purely the result of speculation by investors, who have pushed property prices up," he said.

"But when home prices are pushed up further to another level, who will be willing to buy?" he said, joking that "only mainland Chinese buyers would be willing to enter the market."

Home buyers, however, are more optimistic about the property market's prospects for next year as the index for 2009 has climbed to 87 points -- compared with the index of 78 points for the next three months.

"The market is either headed for a downturn or is likely to fluctuate in the near future," Chang said, adding that the likelihood of the index rebounding to beyond 100 points was slim.

More than 40 percent of the survey's 2,000 respondents expected real-estate prices to decline within a year, while only 26.4 percent believed prices would continue to rise.

Chang said it was unlikely the election would have a significant effect on sentiment.

The survey also found that the government's stimulus policy, pending legislative approval, to cut the increment tax on land value, had little affect on home buyer's willingness to put down a deposit on a residence.

Thirty-eight percent of the survey's respondents said they had applied for the preferential tax rate, but 75 percent of home buyers said the policy had little or no effect on their willingness to buy.
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