Sino Land project eases developers' fears
The first residential project marketed under controversial new guidelines issued by the government has defied the worst fears expressed by developers that the changes would significantly increase their costs and reduce sales.
More than 500 units in the 964-unit project The Hermitage, in Tai Kok Tsui, were sold within a week of its launch last month under the new rules.
'The sales were satisfactory,' Robert Ng Chee Siong, chairman of the developer, Sino Land, said. He said the new rules were unlikely to reduce sales volumes on both the primary and secondary markets - one of the biggest worries expressed by developers.
'They did not add significant costs either, although meeting their requirements did slow down the selling process somewhat,' he said.
Salenda Lau, general manager for sales and marketing at Sino Land, said the positive response to the launch of The Hermitage reflected strong confidence among buyers about the outlook for the market.
'The Hermitage flats were offered on a first-come, first-served basis as we believed that would be the most fair and transparent sales arrangement. And we saw that buyers did not mind queueing up overnight as long as they felt the system was fair,' she said.
Early birds hoping to have their pick of the choicest flats available at the first- and second-phase launch of The Hermitage began queuing as long as 19 hours beforehand. At the first and second launch, by the time the sales office opened at 11am there was a queue of more than 100 buyers.
To avoid any further overnight queuing, Sino Land opened a register of potential buyers for the sale of its third batch of 180 units, released on Sunday last week.
The 715-unit Larvotto - a joint development between Sun Hung Kai Properties, Kerry Properties and Paliburg Holdings - will be the next major project under the spotlight when it launches shortly.
Victor Lui Ting, an executive director at Sun Hung Kai Real Estate Agency, expected marketing expenses under the new rules would be higher and the sales process would be more time-consuming. 'We have to spend more under the new regulations on building an additional unfurnished show flat and the longer process will also require more manpower to manage the sales.
'But these are not major problems so long as transparency in property sales is enhanced.'
To ensure that his sales team complies with the new procedures, Lui has produced a training video for estate agents. But since flats in Larvotto will sell for tens of millions of dollars each, he believed it would not be appropriate to adopt a first-come first-served approach.
'Potential buyers will complain if they are required to queue up for hours or overnight even for a unit worth tens of millions of dollars. We think we may allow buyers to buy directly from us, or we may release units to those agents who have serious buyers on hand.'
A final decision on the sales strategy was yet to be taken, Lui said.
One of the chief complaints from developers about the new rules to regulate the sale of uncompleted projects - which took effect on June 1 - was that they would reduce pricing flexibility. A draft of the new proposal, which was aimed at enhancing market transparency, was announced in April by Financial Secretary John Tsang Chun-wah.
Developers of large-scale projects of 100 or more flats are required to launch at least 50 flats, or 50 per cent of the total, whichever is higher, in the first release. For smaller projects, the minimum is 30 flats or 30 per cent of the total, whichever is higher.
Developers are also required to publish a price list at least three days before the flats go on sale; announce pricing details of transactions within five days of deals being done; and disclose any sales involving board members, or their families. They are also required to build at least one accurate show flat and leave it unfurnished.
In the past, developers would only release a price list for a few units a day before the sale, to test buyer interest. They would then release selected units in batches to property agents who had to persuade their clients to buy even though the flats might not have been their first choice. The failure to produce detailed price lists in advance lead to criticism that opaque sales practices resulted in buyers paying inflated prices.
The Real Estate Developers Association accepted the government proposal as a guideline for releases of uncompleted projects.
Eva Yeung was among those who began queuing early so that she could improve her chance of making an offer for the flat of her choice in The Hermitage.
'It was tiring, but I bought the unit I wanted within my budget,' she said. Yeung bought a 1,400 square foot flat for HK$15 million, or HK$10,714 per sq ft, through her company
A spokesman for the Transport and Housing Bureau said the government would consider legislating to regulate developers if the guidelines, which are not legally binding, are found to be ineffective.
Lui said Sun Hung Kai Properties was not concerned the rule changes would affect sales because the low-interest rate environment made investment in real estate popular.
'We hope to increase sales transparency while at the same time not reducing our flexibility,' he said.
Lawrence Poon Wing-cheung, a spokesman for the Institute of Surveyors' general practice division, urged the government to consider requiring developers to announce the details of transactions by noon the day after deals were done, rather than within five days. 'It will minimise the chances of market manipulation and allow potential homebuyers to get the details of transactions right after the official sale. That way they can make decisions in response to the sales result,' he said.
Developers' sales disclosure should not be limited to company directors and their relatives but also include staff, he said. 'The rules still have room for improvement.'