Real estate law the right answer
In Hong Kong, home ownership remains a distant goal for many. With land scarce and property prices high, most people still live in public housing or rent units in the private market. Those seeking to buy a flat often have to empty years of savings for the down payment for a tiny few rooms; then for years they spend up to half of their income to pay off the mortgage.
The transactions can run to many millions of dollars, but the protection for a consumer is minimal. Buyers often find their flats not as big as claimed. Misleading sales tactics, such as exaggerating the number of transactions in the opening sale, are not uncommon.
The fact is, traders in a wet market may go to jail for selling under-weight produce under the law. But in the absence of legislation, developers can walk away for cheating homebuyers.
After a year-long study, a committee has tabled a package of measures seeking to better protect buyers of first-hand residential property from dishonest real estate developers.
The bill would create requirements for sales brochures, price lists, sales arrangements, sales orders and show flats, and prohibit misrepresentation. It would set up different levels of penalties and an enforcement agency.
The proposed law is a belated but necessary step. Developers now face only the possibility of civil claims by a victim. This bill would set a seven-year jail term for directors and managers who provide misleading information to potential buyers.
Unsurprisingly, the real estate industry finds this too harsh. But since the property market is a key economic sector in Hong Kong, it is important that the law carry strong penalties as a deterrent to wrong-doing. The proposed measures, similar to penalties for spreading misleading or false information to manipulate share prices in the stock market, deserve careful consideration when they come up for debate in Legco.
Getting the bill right is just the first step. Housing officials say the law cannot be ready for enforcement for at least two years. First, the detailed proposals must be spelled out in the legal language of a bill and put out for public consultation. If the legislature passes the package by next July, the target date, it will take another year to establish an enforcement agency.
This seems too long a process. We would like to see officials present a speedier timetable.
Consumers are right to expect transparency and ethical codes of conduct to apply to the marketing of property. With self-regulation in the form of guidelines having proven inadequate, the government should step in. Legislation is the right answer.