Exco endorses plan to ban overstated flat sizes

PUBLISHED : Wednesday, 14 March, 2012, 12:00am
UPDATED : Wednesday, 14 March, 2012, 12:00am


Hong Kong's housing minister is standing firm on a plan to ban the confusing practice of overstating the size of new flats for sale, with the bill to go before lawmakers next Wednesday, despite developers' objection.

The bill - intended to improve transparency in the housing market and end dishonest sales tactics by developers or agents - was approved by the Executive Council yesterday in a form similar to a draft proposal put forward for public consultation, Secretary for Transport and Housing Eva Cheng said.

'It is a fair, balanced, practical and effective package aiming to introduce uniform standards to the industry,' Cheng said.

'The public consultation shows there is a clear consensus the proposed legislation should be enacted as soon as possible.'

She was responding to concerns that Legco could fail to pass the bill before its term ends in July.

Developers are fighting the proposal to end the long-standing practice of using gross floor area - the size of a flat plus its share of common areas, such as hallways and clubhouses - in marketing material.

Critics say the practice confuses buyers and allows developers to inflate the size of a flat arbitrarily, and Cheng says it is not possible to allow developers to continue using gross floor area in marketing material for reference purposes. 'We cannot regulate something that has no standard,' she said. 'It is impossible to have something on a price list just for reference when such a list is regulated by a law with criminal offences.'

But the Real Estate Developers Association, which represents the city's biggest developers, says the ban would infringe its members' free speech. It says other aspects of the bill are unconstitutional and will not survive a legal challenge.

Cheng said revisions to the bill would address concerns that loopholes would allow developers to avoid the regulations, for example by selling a project to its subsidiaries, which could then market the flats as second-hand.

But officials rejected a plea from the Consumer Council to ban developers from taking deposits before the sale of flats begins. The consumer watchdog believes allowing developers to take reservations will reduce transparency and confuse buyers.

Instead, developers will be allowed to take a deposit after the release of the price list, three days before sales start, as long as it is not for a specific flat. The payment of a deposit could, for example, be used to determine the order of priority for buyers.

The bill will take effect 12 months after it is approved by Legco, expected to be in the middle of this year, giving time for the Housing Bureau to set up an enforcement arm.

If the bill is not passed by the end of the Legco term in July, the administration of Hong Kong's new chief executive will have to put the bill forward again and the legislative process will start from scratch.

The law will also forbid misrepresentation in sales materials and show flats and require property transactions to be disclosed online within 24 hours of a deal being completed.

It sets out penalties including a maximum of seven years in jail and a HK$5 million fine for developers who provide false or misleading information to buyers.


The number of submissions drawn by a two-month public consultation, according to the Transport and Housing Bureau