LI, Tao @ Hong Kong

New home sale rules ‘too broad on coverage and fuzzy on penalties’

Hong Kong developers raised objections to some of the measures proposed by the government to regulate first-hand home sales in the city, calling them either unpractical or unfair.

The Real Estate Developers Association of Hong Kong (REDA), an organization representing the interest of the city’s property developers, held a press conference on Tuesday, claiming that the proposed bill to tighten legislation on the sale of first-hand homes is too broad on coverage and fuzzy on penalties. They claim the bill will cause confusion on the second-hand home markets under current stipulation.

On Nov 29, the city kicked off the two-month public consultation on the proposed bill, which covers the sale of all completed and uncompleted first-hand residential properties and imposed a maximum penalty of a HK$5 million fine and seven years’ imprisonment on developers in case that they mislead the consumers.

It also provides a standard definition for the saleable area (net floor area) of flats as the basis for quoting unit prices, other than the commonly applied gross floor area (GFA) which includes an apportionment of public areas.

However, REDA asserts that legislation should only apply to uncompleted properties but not completed ones, as there is no difference in substance between first-hand and second completed flats since both of them can be physically visited by the potential home buyers.

Proclaiming support on the principle of adopting saleable area as the valuation grounds, REDA said as quoting GFA has been the long-standing practice in the market, the new approach will intensify confusion on the primary and secondary markets due to the two separate calculation methods.

However, the government deserted the adoption of GFA in the proposed bill on the grounds that it lacked a commonly adopted definition, which is “inexplicable” to the association as it believes the inclusion of GFA along with the saleable area will give home buyers a better idea of the property they purchase.

It also deems that criminal penalty should not be imposed on all “misleading or misrepresenting” behaviors, while stating that the threat of criminal prosecution may also be exploited by litigious purchasers who are seeking to rescind their agreements whose property price is declining.

REDA said these stipulations failed to achieve the objective set in the bill, which “aims to strike a balance between enhancing consumer protection on the one hand, and allowing developers to continue to take business decisions in the light of market situation on the other.”

A spokesman for the Transport and Housing Bureau said Tuesday that the proposed legislation is primarily based on the recommendations made by the Steering Committee, which had detailed deliberations on the subject for one year, and REDA’s representative was a member of the committee.

The Transport and Housing Bureau nevertheless “welcome the views of the public and relevant stakeholders on the proposed legislation,” the spokesman said in an email written reply to China Daily.

Ho Lok-sang, professor of Economics and Director of the Centre for Public Policy Studies from Lingnan University, also advises the government to consider including GFA as additional material, which satisfies the need of developers while also provides practical information to the home buyers.

“But rules are necessary, no matter it sounds harsh or not,” Ho told China Daily. “As long as you obey the rules, you will be fine, and I believe these developers are capable of it,” said Ho.

litao@chinadailyhk.com
China Daily
(HK Edition 12/21/2011 page2)
http://www.chinadaily.com.cn/hkedition/2011-12/21/content_14296307.htm