Rules for fairer flat sales set out

PUBLISHED : Tuesday, 13 April, 2010, 12:00am
UPDATED : Tuesday, 13 April, 2010, 12:00am

New rules requiring developers to give better information to buyers of uncompleted flats, and more details about flats sold to senior executives, have been proposed by the government in response to complaints about unfair sales tactics and suspected market manipulation.

Housing minister Eva Cheng said the government had been pursuing the issues with the Real Estate Developers' Association (REDA) and rules would be in place as soon as possible. But the association said it would be difficult to comply and it had not yet agreed to the measures.

The Consumer Council and some prospective buyers welcomed the proposals, saying that they would help flat buyers get more accurate information. Critics said the rules would fail to solve the key problems and were far from sufficient.

Under the rules, developers would have to provide accurate information in show flats. This would rule out common practices such as the omission of walls and doors to give an impression of greater space.

They would also be required to announce details of any sales of flats to senior executives of their company or related companies - including the unit involved and the price paid.

A third rule would require the address and location of developments to be stated in promotional materials such as advertisements, which often show an idealised picture.

A person experienced in the real estate industry said the measures did not address key concerns. Tactics such as conducting sales at midnight, selling flats batch by batch and not disclosing flat prices until the last minute had done most to manipulate consumers, he said.

Speaking after visiting two show flats in Hung Hom yesterday for Cheung Kong's Festival City development in Tai Wai, Cheng said a consent scheme agreed with developers had achieved 'certain progress'. If it did not prove effective, the government would not rule out legislation to impose the measures, she said.

Developers must comply with the requirements of the consent scheme when they put uncompleted flats on sale. If they do not follow the rules, the Lands Department can withdraw its consent for the sales.

Reports that New World Development, a co-developer of The Masterpiece project in Tsim Sha Tsui, sold at least seven of the first 30 flats released there in August to relatives of the company's managing director, Henry Cheng Kar-shun, sparked criticism that it was trying to create an impression of good sales, confusing buyers. REDA vice-chairman Stewart Leung Chi- kin, who is also an executive director of New World, was unhappy that the government made the announcement before reaching consensus with the association.

'We have difficulties in doing what it has requested us to do,' Leung said. 'Of course, the government can say this is what it has decided. It can ignore us but the problem is, we usually make announcements after having consented,' he said.

He said the REDA held two meetings with government officials on the issue earlier and it would organise another one this week.

Not all developers and agencies opposed the proposals, however.

K Wah Group chairman Lui Che-woo said it was a good move as long as the measures were not too harsh, while Sun Hung Kai Real Estate Agency said it would fully support the measures. Executive director Eric Chow said he believed the government would strike a balance between the operational needs of developers and regulation of the industry.

Dr Lawrence Poon Wing-cheung, a spokesman for the Institute of Surveyors' general practice division, said the requirement for developers to disclose connected transactions would do little to prevent market manipulation.

'Disclosure should cover all transactions by the developer's staff and not just its senior executives. If a developer wants to manipulate the market it is easy to deploy low-ranking staff or even a cleaning lady,' he said.

Late last year, the government implemented three other rules to boost the transparency of the sale of uncompleted flats. It required developers to state clearly the price per square foot or metre of saleable area; provide transaction records of individual flat sales within five working days of a deal being confirmed; and state floor numbers clearly in sales brochures.

Poon said the government should reinforce the requirement that developers provide information on flat sales within five days of signing a sale-and-purchase agreement. Most of the disclosures so far had shown only the lump-sum prices of flats sold, without the flat size, he said.

Democratic Party legislator Lee Wing-tat urged the government to tighten the rules through legislation and make it a criminal offence to release misleading flat information. His party will raise the issue at tomorrow's meeting of the Legislative Council.