New World's sales tactics spark controversy, again

PUBLISHED : Monday, 15 March, 2010, 12:00am
UPDATED : Monday, 15 March, 2010, 12:00am

It seems like a case of deja vu.

Five years ago, New World Development sold about 200 flats to staff and business partners at The Merton in Kennedy Town - a project it developed with the Urban Renewal Authority. The private sale sparked criticism of the way developers go about marketing their projects.

Now similar questions are being raised about another New World-URA project, The Masterpiece in Tsim Sha Tsui. And once again, New World is being accused of manipulating the property market by selling 39 flats to business associates at the beginning of private sales - a practice which lawmakers said was aimed at artificially creating a picture of good sales. At a later stage flats were also sold to the company's top management and their relatives.

Critics are asking why the developer was allowed to adopt the same controversial sales tactics, and whether the URA learned any lessons from the previous controversy. They also said the government should tighten sales procedures for all flats.

'New World is still allowed to abuse the sales procedures. It seems that the authority didn't learn much from the experience,' Democratic Party lawmaker Lee Wing-tat said. 'There are questions ... like who the business associates are.'

Lee criticised the developer's sales practices, saying: 'They don't even have public sales for The Masterpiece. All buyers have to go through a sales agent.'

The authority said procedures had been improved after The Merton controversy, with developers' staff not allowed to buy flats in private sales. And while business associates or partners are allowed to buy flats in private sales, the price needs to be approved by the authority.

A spokesman for the authority said its board would review sales procedures at its meeting this month.

A New World spokesman said sales procedures for both projects complied with the authority's rules.

Both The Merton and The Masterpiece were started by the authority's predecessor, the Land Development Corporation.

In the former, New World acted as a contractor and shared no profit. In The Masterpiece, a project that allows owners' participation, New World as the majority owner will share profits with the authority.

The Merton project was thrown into the spotlight when an investigation by the Independent Commission Against Corruption found a former executive director of the authority, Russel Hui, bought 24 flats there after he left the authority and evaded HK$496,000 in stamp duty. District Court Deputy Judge David Dufton, sentencing Hui to 15 months in jail last year, said the case highlighted a lack of supervision by the authority over internal sales.

Two former top URA officials admitted there were no rules to ban a developer's staff and business associates from buying flats in private sales five years ago. 'The authority approved the price list. But it's hard to identify whether a buyer is an employee of the developer,' one said.

A former manager of the authority said: 'It's a commercial project. Rules were already laid down by the Land Development Corporation. We couldn't impose too many restrictions.'

A third former URA official, who was involved in both projects, said there were concerns at the time that the internal sales arrangement at The Merton had allowed the developer's staff and business associates to reap a profit by reselling their flats at a higher price after public sales began.

Lawrence Poon Wing-cheung, a spokesman for the Institute of Surveyors, said the problem was not confined to redevelopment projects. He urged the government to improve transparency although he agreed that private sales were useful to developers who wanted to test the market's response.

Poon suggested that developers be required to declare the number of flats going to staff and business partners in all flat sales. 'I'm not asking developers to name their staff and friends. They just need to signify flats bought by related persons,' he said.