Legislative Council Question 3 : "Internal Sales of Uncompleted Residential Flats" by the Hon Lee Wing-tat and an oral reply by the Secretary for Housing, Planning and Lands, Mr Michael Suen, in the Legislative Council

    Following is a question by the Hon Lee Wing-tat and an oral reply by the Secretary for Housing, Planning and Lands, Mr Michael Suen, in the Legislative Council today (June 1):

 

Question:

 

    It was reported that during the internal sale of uncompleted residential units, some property developers had not provided prospective buyers with the price list of all the flats put up for sale, and that the number of flats sold and their sale prices announced by the property developers concerned were at variance with the records of conveyancing transactions subsequently registered at the Land Registry.  In this connection, will the Government inform this Council:

 

(a) whether the Lands Department has attached, when approving consents for pre-sale of uncompleted flats under the Consent Scheme, conditions requiring the property developers to provide prospective buyers with the price list of all the flats put up for sale at the internal sale of uncompleted flats and to ensure the accuracy of information released regarding the sale situation; if it has attached such conditions, whether any property developer has been found, since last year, to have violated them; if it has not, whether it will consider attaching such conditions;

 

(b) of the legal basis for the existing mechanism adopted for regulating the internal sale of uncompleted flats by property developers, and the measures or penalties that may be imposed on those property developers who fail to comply with the regulatory requirements; and

 

(c) whether it has assessed if there are any problems with the above regulatory mechanism; if the assessment result is in the affirmative, whether it will comprehensively review the mechanism, and even consider reducing or completely forbidding the internal sale of uncompleted flats by property developers?

 

Reply:

 

Madam President,

 

    Before replying to the Honourable Member?s question, I would like to briefly talk about the arrangements on internal sales of uncompleted residential properties prescribed under the Lands Department Consent Scheme.  Under the Scheme, developers are required to make available sales brochures.  In addition, before the onset of public sales, developers are required to make available the list of units that are to be offered together with their individual prices.  It had been developers? practice all along to put up, before the onset of public sales, some units for internal sales to test the market.  In order to have more flexibility in setting asking prices and devising marketing strategies, developers did not provide the lists of units on offer and their prices.  Nevertheless, since 2001, the Real Estate Developers Association of Hong Kong (REDA) has established a self-regulatory regime, under which its members are required to comply with guidelines issued by REDA.  The aim is to enable intending purchasers to get hold of adequate and accurate information before they decide whether or not to enter into property transactions.  

 

    My reply to the three parts of the question is as follows:

 

(a) As I mentioned just now, pre-sale consents given to developers do not require them to provide price lists to prospective purchasers in internal sales.  However, since its establishment in October 2001, REDA?s self-regulatory regime has required developers to provide sales brochures to intending purchasers participating in internal sales.  It came to the notice of the Administration early this year that with the steady recovery of the property market and resurgence of buyers? interests, some developers had adopted different sorts of sales strategies to liven up the market.  This has given rise to concerns in the community.  In view of this, the Administration wrote to REDA in March this year requesting it to strengthen the guidelines requiring developers to make available to intending purchasers in internal sales price lists and lists of units on offer, and take measures to ensure that any sales information released by developers is accurate and comprehensive.  At the request of the Administration, REDA issued a set of supplementary guidelines in April this year for compliance in the following four areas:

 

(i) developers should take reasonable steps to inform purchasers of any subsequent material changes with regard to the information provided in sales brochures;

 

(ii) a copy of the Deed of Mutual Covenant and the government lease should be provided at the sales offices for free inspection by intending purchasers;

 

(iii) price lists and lists of units on offer in internal sales should be made available to intending purchasers; and

 

(iv) sales figures, if released by developers, should be as accurate as possible.

 

    The Administration believes that so long as developers genuinely comply with the guidelines issued by REDA, the interests of prospective purchasers would be reasonably protected, and there is no need at the moment to impose more mandatory conditions.  The Consumer Council agrees in principle with our approach of further strengthening REDA?s guidelines.  REDA is currently reviewing the guidelines with a view to further improving their operation and effectiveness.

 

(b) Although REDA?s self-regulatory regime has no legal effect, we rely on members of the public, the media and the Consumer Council, who together have been monitoring the operation of the regime.  Developers are mindful of upholding their company reputation.  Any reports on breaches of the guidelines on internal sales will generate negative impact on the reputation of developers and could also affect the sales performance of their projects.

 

(c) Regarding assessment of existing arrangements, I wish to point out that any new measures proposed should satisfy two basic principles.  First, they must be practical and will not fetter the operation of the property market.  Second, they must protect the rights of consumers while maintaining an orderly, fair and open market.

 

    We have adopted a two-pronged approach to review the existing arrangements.  First, the Administration together with the Consumer Council and the Estate Agents Authority met with REDA last week and invited REDA to conduct a comprehensive review of internal sales arrangements as well as the transparency and accuracy of information released by developers.  We also asked REDA to re-structure its guidelines on internal sales arrangements in a clearer and more concrete manner.  REDA has undertaken to require the frontline staff of its members to thoroughly comply with all guidelines relating to the sale of uncompleted residential properties and to provide price lists and copies of Deeds of Mutual Covenant for intending purchasers? reference.  REDA has also undertaken to form an internal task force to comprehensively review the internal sales arrangements adopted by its members.  Comprehensive and specific proposals are expected to be put forward within three to four weeks.  On the other hand, we have asked the Estate Agents Authority to issue new circulars to remind estate agents to comply with the provisions in the Estate Agents Ordinance to provide accurate information to intending purchasers.

 

    Having regard to the two principles I mentioned earlier, we have no intention at the moment to reduce or forbid internal sales of uncompleted flats by developers.  This is to minimize as far as possible intervention in the property market so as to maintain its continued healthy development.

 

    Lastly, I wish to take this opportunity to reiterate one point, and that is, the public should not come to hasty decisions to buy properties on account of reports that certain new projects are selling fast.  Members of the public should carefully consider their affordability and needs, and look up the actual prices of comparable transactions in the market.  In this regard, they could check the comparable transactions registered with the Land Registry.  The Consumer Council has also indicated that it will consider stepping up its educational activities as necessary to enhance consumer protection in matters relating to property transactions, such as publication of pamphlets.  If necessary, members of the public should, depending on their actual circumstances, seek advice from professionals such as surveyors or solicitors.

 

 

Ends/Wednesday, June 1, 2005

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