Glitzy marketing attracts buyers
Creativity is paying off for Hong Kong's property developers. Despite more stringent guidelines on the more colourful descriptions of properties, well-executed advertising campaigns are drawing homebuyers. Look no further than the recent frenzy at the launch of new luxury apartments.
There are still glitzy billboards with images of diamonds and affluent European couples vainly trying to gentrify the grey concrete thoroughfares of districts such as Tai Wai, but many advertising campaigns now have disclaimers owning up to the artistic licence taken.
Restrictions on creative zeal or not, effective publicity and marketing seem to be generating good sales for new residential properties.
Since the start of the year, buyers have shown strong interest in the pre-sale launches of uncompleted flats, such as Le Prime of Cheung Kong in Tseung Kwan O, YOHO Midtown of Sun Hung Kai Properties in Yuen Long, and Island Crest of Kerry Properties in Western.
The marketing ploys by some developers for residential sales, however, have been controversial for years with continuing concerns that buyers are in danger of being misled by incomplete market information.
The past two decades have witnessed continued struggles between the government and developers over the lack of market transparency and the need to regulate property sales, and to enhance consumer protection.
In the latest manoeuvre to step up scrutiny, the government implemented three new rules last month for the sales of uncompleted flats. Developers are required to provide accurate information in show flats, meaning that they should not use thinner walls to mislead potential buyers into believing a flat is more spacious than it actually is.
The exact location of their projects should be clearly spelt out and information about transactions by senior executives of the developer be made available to the public.
Compliance with the new measures does not seem to be difficult.
The changes follow serious concerns about unusual pre-public sales and renewed complaints about the use of thin walls, shrunken furniture and allegedly misleading fittings at show flats.
In the course of formulating the new measures, Secretary for Transport and Housing Eva Cheng Yu-wah inspected the show flats of new projects, such as Hill Paramount, Meridian Hill and Festival City, to get a personal experience of the mock-up units.
What probably grabbed most attention in recent months was the unexpected delay in completion of transaction contracts signed for 25 flats at Henderson Land Development's 39 Conduit Road luxury project that were sold at sky-high prices, and the private sale at The Masterpiece in Tsim Sha Tsui to a co-developer's associates.
Late last year, the government also introduced other rules to boost transparency of sales of uncompleted flats by requiring developers to state clearly the price per square foot of usable area, to provide transaction records of individual flat sales within five working days of a deal being confirmed, and to state floor numbers clearly in sales brochures.
With all these measures, the government appears to be seriously addressing concerns that homebuyers were being misled by confusing information. Some critics and analysts still question the effectiveness of the new rules.
Wong Leung-sing, associate director for research at Centaline Property Agency, describes the new rules on show flats and disclosure of transactions related to the developer's senior executives as 'piecemeal measures'.
'That should be enough as long as developers put up a standard show flat for prospective buyers. What the government needs to do is take the initiative to release more land parcels on a large scale for sale by auction or tender if it really wants to resolve the issue of rising prices,' he says.
Pang Shiu-kee, managing director of SK Pang Surveyors, says the government is still trying to minimise regulatory controls on flat sales so as not to disrupt the operations of the property market.
Given the seriousness of market concerns, he says there is a need to address the grey areas in property sales practices and to use legislation to outlaw deceptive flat-sale tactics.
'With their financial strengths and resources, developers should be able to cope with extra demands in property sales practices, especially when the overall market is so strong now,' he says.
Over the years, there have been mounting concerns that the residential sales process is beset by dubious marketing techniques and unusual pre-sale transactions.
Tactics used in the pre-sales of uncompleted flats allegedly include misleading information about floor area and the lack of transparency in pricing and transactions.
According to experienced industry players, the property sales process was relatively straightforward in the 1960s and '70s, with price lists made available to the public. Some developers even provided details on the interior floor areas of bedrooms and living rooms.
Over the past three decades the game has changed.
The efficiency ratio, or the actual living space, of residential flats has dropped substantially with the provision of more clubhouse facilities and areas of common usage.
Today, high-profile transactions in pre-public or private sales enable developers to grab the market spotlight, induce a favourable sentiment and grab the attention of homebuyers.
In the 1990s, the government imposed restrictions on private sales by developers in a series of stringent control measures, such as higher deposit payment by buyers, to curb property speculation.
Analysts say the government is unlikely to resort to such radical measures now, despite occasional scenes of chaos at residential releases, and confusion and conflicting price information at individual sales in recent years.
Residential flats are being sold off the plan under the Lands Department's Consent Scheme but the rules are not statutory.
Self-regulation by developers is essential to the present system. This has drawn renewed calls for legislation to ensure increased transparency in the sales process for uncompleted flats.
While the government should demonstrate determination to eliminate undesirable sales practices and ensure an open and fair market, Pang says consumers are required to play their part in the process.
'There is absolutely no reason for a buyer to go to the developer's sales office at midnight to make a hasty decision,' Pang says.
'Developers have moved forward and adapted to the market changes over the years. They know how to play the game and play it well.
'Homebuyers should also upgrade themselves and become smarter so that they will not lose out in the process.'