New property rules come at the right time
As Hongkongers have grown richer, their new flats, ironically, have actually been getting smaller. This is because living space in proportion to the gross floor area of their homes has consistently shrunk over the past three decades. Buying a flat is usually the most important financial decision a person can make in his or her lifetime. But flat buyers in Hong Kong are getting less and less for their purchases; developers build ever-bigger - but ill-defined - common areas that eat into the space where people live. This trend needs to be reversed. Belatedly, the government has taken a significant step to improve transparency in the market for uncompleted flats. This will go some way towards creating a fairer market for buyers.
From the end of the month, developers must state the saleable floor area and its price per square foot or metre when their uncompleted flats go on sale. Coupled with an earlier rule that explicitly defines saleable floor area as a flat's internal floor size plus the balcony, the new rule will severely restrict the latitude currently enjoyed by developers in promoting new developments. Mind you, there are still features such as the thickness of walls and utility platforms - built, for example, for air conditioners and washing machines - that may be included in the internal floor area. However, the scope for manipulation is significantly reduced. Under the new rules, the transaction records of flats will also have to be made public within five working days of the sale being confirmed, instead of the current one month.
The price per square foot or metre of saleable area is important information for people buying uncompleted flats. This is because unlike, built flats, potential buyers cannot inspect actual units but only showcase flats. But currently, that vital information is usually revealed only after a sale has been completed. As a rule, developers and their sales agents only list the flat price in terms of its gross floor area in promotional materials. This common practice misleadingly lowers flats' price per square foot to make them look more attractive to buyers.
It is also a deceptive way for developers to make buyers pay for common areas, which could include anything from gardens, play areas and huge clubhouses to management offices, car parks, lift lobbies and staircases, air-conditioning rooms and refuse-collection points. Common areas may also include the extra floor areas developers get for free from the government by incorporating environmental features. As such green features have become a source of widespread abuse, the policy has clearly not worked. It is time for the government to either scrap it, or force developers to provide environmentally friendly facilities by law.
Because of such unscrupulous practices long tolerated by the authorities, the actual size of flats in Hong Kong has shrunk by as much as 22 per cent since the 1980s, according to one study. If we are to become a truly first-class international city, we must improve people's quality of life. This must start at home, literally. People deserve more spacious living areas and value for their property.
Since the start of the global financial crisis, the property markets in Hong Kong and the mainland have bounced back quicker than those of most other major economies. People are, once again, jumping back into the market. In addition to new measures put in place to cool a market in danger of overheating, the government has picked the right time to introduce much-needed rules to make property transactions more transparent and fair.