LCQ6: Information on resale prices of residential properties
Following is a question by the Hon Fred Li and a reply by the Secretary for Development, Mrs Carrie Lam, in the Legislative Council today (July 6):
It has been reported that the means employed by real estate developers to acquire old buildings have all along been under criticism, and such means include completing transactions at a "split price" (e.g. a transaction on a property with an actual price of over $2.7 million is completed at a registered price of $1.2 million, and a removal fee over $1.5 million), so as to create an illusion that old buildings are acquired at low prices, and persuading owners to sell their property ownerships by making deceptive claims that 80% or 90% of the ownerships in the buildings have been acquired. In this connection, will the Government inform this Council:
(a) regarding a report last month that a company engaging in old buildings acquisition made use of a loophole in the Land Registration Ordinance and only registered in the Land Registry the provisional agreement for sale and purchase (PASP) and the formal conveyance on sale, and did not register the supplementary agreement relating to the value of conveyance on the sale of that property, whether the Government will review the Ordinance and make amendments to the effect that the information registered under the Ordinance reflects the true value of conveyance on sale of properties;
(b) whether at present the Lands Tribunal, Urban Renewal Authority and Rating and Valuation Department make projections and compile statistics on the basis of the property prices registered in the Land Registry; if so, whether changes will be made to use the value of conveyance on sale of properties required to be listed in the agreements for sale under the Stamp Duty Ordinance together with other considerations for such projections and statistics; and
(c) whether it knows if the Estate Agents Authority (EAA) has performed random checks since issuing a practice circular in August last year to require estate agents to state the true purchase price on PASP; whether EAA will make reference to the requirements under the Stamp Duty Ordinance and amend the relevant regulation to stipulate that estate agents must list on PASP all considerations related to the conveyance on sale of properties, and whether it will require estate agents to provide accurate information to owners in accordance with the records in the Land Registry when providing information on property ownerships of acquired buildings, and to show the relevant records?
Acting Madam President,
The Hon Fred Li's question is based on a report of the price offered by a real estate developer in acquiring old buildings. It however appears that the crux of the matter is how the public can obtain accurate information on the resale prices of residential properties. This is an issue about property market information which also falls within the ambit of the Transport and Housing Bureau and the Estate Agents Authority (EAA). Therefore, the Secretary for Transport and Housing has joined me to answer Members' questions today.
My reply to the three-part question is as follows:
(a) The purpose of the Land Registration Ordinance (LRO) is to provide for the registration of deeds, conveyances, judgments and other instruments affecting real or immovable property, and the keeping of land transaction records for public search purposes to facilitate the title to landed properties to be easily traced and ascertained. That is to say, the maintenance of land registers and land transaction records is for a repository of private property ownership information for the public. Having regard to the ambit of the LRO, we do not consider that there exists any loophole in the Ordinance as referred to by the Hon Li. Nor do we consider the Ordinance a suitable vehicle to regulate malpractices, such as price mis-information and market manipulation.
(b) In acquiring properties, the Urban Renewal Authority (URA) will appoint independent professional surveyors to assess the market value of the properties to be acquired and make reasonable acquisition offers.
When assessing the market value of properties, the surveyors appointed will analyse the relevant information of the properties to be acquired, collate and analyse the transaction records of similar neighbouring properties registered at the Land Registry (LR), and select a considerable number of transaction cases for comparison. The surveyors will examine the relevant information of the transacted properties, including the transaction dates and transaction prices etc., and conduct analyses based on the unit prices per square foot of saleable area. In determining the market value of the subject properties, the surveyors will also rely on their professional observations and judgments on the property market and market prices over a long period of time, as well as their analyses of transaction cases making reference to other market information including relevant market reports, market analyses, data and news on the sale and purchase of first-hand and second-hand properties and transactions of similar properties in other districts etc. If it is found that the transaction prices of similar neighbouring properties selected for comparison are, for various reasons, higher or lower than the market prices, or the information is inaccurate, the surveyors will not take such transaction cases as reference.
In assessing the market price of a residential property, the surveyors will consider factors such as the surroundings, building age, floor level, area, views, orientation, physical conditions and building facilities of the subject property. In assessing a commercial property, they will make an analysis based on factors including the location, pedestrian flow, shop-front width, ceiling height, area and configuration of the property. They will carefully consider, analyse and compare transaction cases and the level of market values before determining the reasonable market value of the target property to be acquired based on their expertise and experience.
By adopting the above method of assessment, neither the assessment by the URA of the market value of the target property to be acquired, nor the assessment of the "Home Purchase Allowance" offered under its acquisition policy on the basis of a notional seven-year old replacement flat will be affected in case the resale prices of certain properties registered at the LR are lower than the actual prices of the properties.
One of the duties of the Rating and Valuation Department (RVD) is to assist the Collector of Stamp Revenue in vetting the stated consideration of transactions involving transfer of property to safeguard the Government's stamp revenue. Extensive property transaction information will be collected during the vetting and such data also serves as the main reference materials in capital valuation and compilation of statistics. The resale prices of properties registered at the LR are only one source of reference for the RVD in assisting the Collector of Stamp Revenue to determine the stamp duty payable. As such, the vetting by the RVD of stated consideration of transactions will not be affected in case the resale prices of certain properties registered at the LR are lower than the actual prices of the properties.
As for the question raised in respect of the Lands Tribunal, we have consulted the Judiciary, which considers that the matter involves legal issues and it will be inappropriate for the Judiciary to give its views in this regard.
As mentioned above, the URA and the RVD do not rely on the data on property prices recorded in the LR as the only source of reference when assessing and determining the market prices of properties. They will make reference to other market information, reports, analyses, as well as property data and news available on the web to carry out analyses as appropriate.
(c) The Estate Agents Practice (General Duties and Hong Kong Residential Properties) Regulation requires that estate agents should provide clients with accurate information on the prices or rentals of residential properties, and should not mislead clients.
The EAA is concerned about the practice of estate agents in the acquisition of old buildings. In this regard, the EAA issued a Practice Circular in August 2010 to stipulate the requirements as set out in the law and the Code of Ethics which practitioners should comply with when engaging in the acquisition of old buildings, with a view to protecting the owners' interest.
As regards acquisition price, the Practice Circular requires estate agents engaging in the acquisition of old buildings to set out the actual acquisition price in the Preliminary Agreement for Sale and Purchase (PASP). Also, it requires that estate agents should not exaggerate other payments (e.g. removal allowance) in order to create a false impression of a lower acquisition price.
The EAA has not received any complaints on estate agents not stating the actual acquisition prices in PASPs since issuing the aforementioned Practice Circular last year. During inspections on estate agency shops, the EAA has reminded practitioners to comply with the requirements as set out in the law and the Code of Ethics in the acquisition of old buildings. Licensees who are found to have breached the Estate Agents Ordinance (EAO), the Code of Ethics or the Practice Circulars may be liable to disciplinary actions by the EAA in accordance with the EAO.
Ends/Wednesday, July 6, 2011
Issued at HKT 16:39