New property law deserves support
The way in which property is sold and marketed has long been a matter of public concern in Hong Kong. The marketing of properties is not regulated, unlike that for other commodities and services. The absence of statutory protection has sometimes left homebuyers short-changed by unscrupulous developers. Examples are aplenty. For instance, flats are found to be not as big as claimed. The mountain scenery and sea view shown in glossy sales brochures turn out to be landfills or cemeteries. The number of transactions in the opening phase of a sale has also sometimes been faked to create a false sense of the popularity of a particular development.
After a year-long study by a government-appointed committee, a comprehensive law on the sale of new flats has been released for public consultation. Under the plan, show flats, promotional brochures, the definition of flat size, as well as the release of data about prices and transactions will all come under the law. It is good to see that better protection is in the pipeline. Hopefully the property market, one of the key economic sectors in the city, can develop healthily.
A contentious point is whether or not developers who flout the law should face criminal sanction. At present, they only face the possibility of civil claims by victims of the alleged breaches. The government suggests that directors, management and staff of developers who provide false or misleading information to customers should be liable to prosecution and face jail and a fine of up to HK$5 million if guilty.
The proposal may seem too harsh, but the punishment should be strong enough to deter abuses. The level of the fine is hardly excessive, taking into account the general cost of property. A jail term for providing misleading information can also be justified. The sale of investment products under the Securities and Futures Ordinance is subject to similar sanctions. Putting a legal framework in place is just the beginning. More importantly, the regulations should be comprehensive and effective. It would be meaningless to enact a law which can be circumvented easily. The proposed regime has already drawn concerns that developers may be able to get around the rules by first selling the new flats en bloc to a company, which can then resell them to individual buyers as 'second-hand' flats. It would be a major loophole if developers could dodge the law in such a way. Officials should therefore look into this area to ensure that the law is effective.
Understandably, the property sector would like to see as few restrictions as possible. But there is clear public consensus that a law is needed to stamp out misleading sales practices and make property transactions more transparent. A new law can only be conducive to healthy market development and deserves public support.