Hong Kong to get tough on errant property developers

The Hong Kong government has proposed a new law that will slap fines and jail terms on property developers who mislead buyers of new homes.

The government yesterday kicked off a two-month consultation period on the new law, which it hopes to introduce to the Legislative Council in the first quarter of next year.

“There are consumer protections on other areas and there should be similar protections on selling properties,” said Ms Eva Cheng, Secretary for Transport and Housing, as she called for improved transparency.

She said the current slump in property prices in the Chinese Special Administrative Region did not affect the government’s motivation to put new rules in place.

The new law would govern all first-hand projects, whether completed or sold off-plan. “It has to be done, and there is never a better time,” she said.

The maximum penalty for misleading the public would be a fine of HK$5 million (S$833,000) and seven years in prison. Minor breaches would be punished by a fine of around HK$100,000.

Under the proposed rules, developers would have to make a sales brochure on each property available at least seven days before sales begin. The brochure would list the property’s address and the neighbourhood it is in. The brochure would also have to provide the saleable area of the property and will not be allowed to contain artist’s impressions of the development.

Residential property in Hong Kong has traditionally been priced and promoted based on gross floor area, not the nett area. But consumers have complained about misleading practices from developers, who often include an apportionment of public areas such as lift lobbies and clubhouses in the gross floor area of a flat.

“We agree the current measures are not sufficient. The public is rightly concerned about the sale of first-hand properties,” Ms Cheng said, adding that the new rules are a top priority for her bureau in the coming year.

Mr Edward Farrelly, director of research at brokerage CBRE, said: “Developers will try to resist a major hit on their margin. However, if the market is faced with a downturn, they may have to accept lower margins.”

He expects Hong Kong residential prices to fall 20 per cent over the next year.

Mr Andrew Lawrence, analyst at Barclays Capital, has forecast a decline of 25 to 30 per cent in Hong Kong property prices, assuming the city pulls off a soft landing. The plunge would be 35 to 45 per cent in the case of a hard landing, he predicted.

Source : Today – 30 Nov 2011

Join The Discussion

Compare listings