Amid failed projects, housing chief backs pre-sale scheme

Michael Suen tells Legco that corruption is to blame - not the consent system

The recent failure of two housing projects should not be blamed on the government's pre-sale 'consent' system, Secretary for Housing, Planning and Lands Michael Suen Ming-yeung said yesterday.

'These incidents were a surprise, but were not a result of the system itself. This happened because someone did something they should not have, and police will look into the matter,' Mr Suen told a Legislative Council panel.

The consent system, which has been in place for 42 years, relied on the ethics of the professionals involved in property transactions, he said. It would be continued despite the two recent scandals involving the Villa Pinada and Aegean developments in Tuen Mun.

The 319-unit Villa Pinada, built by True Gold Investments and owned by locally listed Gold-Face Holdings, was placed under receivership on May 16 after it failed to repay about $200 million in syndicated loans to the Bank of China. Five days later, its sister project, the Aegean, hit trouble as its developer, Profit Nation Development, a Gold-Face subsidiary, was also placed under receivership.

Both were being developed under the consent scheme, whereby developers can sell flats before they are finished and use the proceeds to complete construction.

The scheme was introduced in 1961 after a series of scandals in the late 1950s, and was intended to ensure that property transactions were carefully monitored. Developers must register with the government, proceeds from pre-sales must be placed in special accounts that can only be used for construction of the project and a number of other strict criteria must be met.