Protect homebuyers from dodgy sales tactics
Land is at a premium in Hong Kong. After decades of high land prices and inflation, many Hongkongers believe investing in property is their ultimate dream and the best financial investment in life.
Many developers have not only made a fortune by taking advantage of this high demand, some have made billions more by exploiting policy loopholes. They reaped huge profits by selling flats with inflated saleable floor areas.
Early last year, the government zeroed in on private developers' opaque sales tactics and exaggerated advertising claims - which led buyers to think they were paying for more than they got - by implementing a series of measures to curb unfair sales practices. They were meant to tighten the rules that control property transactions in the primary housing market.
The government now wants to introduce legislation to prevent developers from using the provision of public space to increase the saleable floor area, hoping to limit the percentage of inflated floor space to under 10 per cent.
Officials might have plugged a loophole in one area, but some developers, with the help of estate agents, have managed to seek out legal loopholes elsewhere, and have manipulated the market to maximise profits.
A case in point is the controversy surrounding a luxury residential development at No 38 Conduit Road, previously the site of a tenement building. A disgruntled buyer accused the developer, Winfoong International, of failing to honour the transaction.
The buyer complained that she had paid nearly HK$10 million for a 690 sq ft unfinished apartment that looked like a 'rubbish dump' when she took possession of it. She claimed the layout, facilities and interior fittings were all substandard.
In Hong Kong, we pride ourselves on consumer service and put a lot of emphasis on promoting and protecting consumer rights. We can't just turn a blind eye to unjust or deceitful practices.
The problem is that, when the government took action to regulate flat sales last year, it targeted only the sale of new apartments, not those redeveloped from tenement buildings or sites that previously housed such buildings.
The Icon is built on a site with an unrestricted land lease, which means the sale and purchase of its flats are not controlled by the Lands Department Consent Scheme. The scheme considers applications by developers to sell flats in uncompleted projects, denying approval to those who cannot prove they have the means to complete the project.
Another problem is that Winfoong is not a member of the Real Estate Developers Association, which means it is not regulated by the rules of the association or bound by government directives.
In order to prevent future recurrences, a government committee, which is studying the option of using legislative means to regulate the sale of new flats, is looking to expand the regulation's scope to include projects with unrestricted leases.
Plugging the legal loophole is just one way; we need to tackle the root of the problem by regulating the conduct of stakeholders. If the government can't control the powerful developers, officials should at least rein in property agents, to protect buyers more.
Property transactions in Hong Kong involve hundreds of billions of dollars every year. It is not an easy task to regulate the sector effectively. The government needs to reform and empower the Estate Agents Authority to regulate its members.
The authority can serve as a powerful gatekeeper to ensure that all transactions are carried out in a transparent, fair and just manner by providing all necessary and correct information to buyers.
