New restrictions on pre-selling unfinished flats have again put developers and the Government at loggerheads. The Real Estate Developers Association said the new measures were 'a direct infringement of the rights of property ownership'. It also said the initiatives attacked 'the very foundation of Hong Kong's free-market economy principle' and were an 'unwarranted intervention in [the] normal commercial decision-making process'. The latest dispute centres on the extension of the pre-sale period from 12 months to 15 months for unfinished flats. Now all flats must be offered for sale within six months of the issue of consent for pre-sales, and developers are required to release at least 20 per cent of the project in each batch. The extension of the pre-sale period should be good news for developers, who have long lobbied for the right to sell unfinished flats earlier. By marketing flats sooner - and pocketing the money sooner - developers can reduce borrowing costs and fund new projects. But the new conditions would undoubtedly make it more difficult for developers to market properties, observers said. When they were announced last week, Secretary for Housing Dominic Wong Shing-wah said the measures would promote greater certainty in the supply of flats. He was critical of developers' sale tactics, saying: 'The marketing strategy adopted by some property developers to release flats in very small batches tends to create an impression of artificial shortage, reduces choices, increases competition and thus makes buyers less able to take informed decisions. 'The adjustment will ensure that a reasonable number of flats will be put on to the market each time, thus avoiding distorted market information and benefiting home buyers.' Selling in small batches has been a common practice in the market. Analysts said the tactic was useful to developers trying to test buyers' response, establish positive sentiment and maximise profits by raising prices in following batches. Developers' strong opposition to the new rules was predictable, but this time their fury is even stronger than when the Government introduced its previous series of anti-speculation measures in June 1994. Analysts said the new restrictions would reduce the room for developers to test buyer response through limited flat releases. Critics said the restrictions were very interventionist and would unduly influence developers' marketing strategy and timing, which should be market decisions. 'The Government has overdone it this time. The measures will deprive developers [of the] autonomy to market properties and increase their investment risks,' one critic said. 'Under the new measures, developers could be forced to compete directly and sell properties within a period of time even if buying sentiment is weak.' The Government has blamed the marketing tactics of developers for the recent surges in home prices, while developers claim that they have been selling flats as soon as they get pre-sale consent. Analysts said extensive media reports that focused on subscriptions for new property sales also helped sensationalise the issue and create a false picture. While speculators were blamed for the recent price rallies, general buyers should also share responsibility since many of them flocked to purchase blindly, they said. Critics said the Government, instead of trying to control marketing practices, should opt for a more moderate approach and educate buyers so they understood the 'real picture' and could protect their interests. 'The Government has all data concerning every property and transaction in the territory. It can do something by publishing research and analysis pieces to inform the public of the actual market situations,' one critic said. Early last month, Mr Wong said the Government would take action only if people's livelihoods were significantly affected by property prices. However, the latest action shows the Government's determination to control spiralling prices and may have a cooling-off effect on the market. Mr Wong said the extension of the pre-sale period could result in about 5,000 flats being put on the market earlier than would have been possible and would provide a greater choice of flats. One factor unaccounted for, though, is whether or not developers will co-operate. For example, it is unknown how they will react to future applications for pre-sale consent of new projects and whether some will try to escape pre-sale controls by delaying flat sales until after completion. The impact of the new restrictions will not be known for at least six to nine months, when the first project to be affected is expected to come on to the market. The Government is under great pressure to do something to keep property prices within the reach of general buyers. It has found out, however, that trying to balance the interests of the public with those of the developers has landed it in the crossfire.