Hong Kong Housing Secretary Eva Cheng speaks at a media briefing in Hong Kong Monday. The Hong Kong government has told developers to correctly display show flats and disclose sales to senior company executives in a bid to enhance transparency of home sales and not mislead buyers amid concerns about a price bubble. Timothy O'Rourke / Bloomberg News

Thin model suite walls that increase apparent floor size to be banned

The government is taking new initiatives to enhance transparency in flat pre-sales by developers in a bid to protect home buyers from misleading marketing tricks.

"A developer's pre-sale consent for a project could be cancelled if it is found guilty of providing false or misleading information when pre-selling uncompleted flats," Secretary for Transport and Housing Eva Cheng warned Monday, when fielding questions by media.

The government will ask developers to enhance transparency in their pre-sale activities in three aspects, Cheng revealed.

From now on, developers should not use thinner walls in their sample flats, which can mislead potential home buyers into believing a flat is more spacious than it actually is, she said.

Developers should also deliver all finished units with whatever devices or installations displayed in the model flat.

Currently, many developers partition their model flats with slim walls and install devices that usually make them look more spacious and elegant.

Moreover, in terms of accuracy in marketing materials, developers will need to spell out the exact location of their projects, she said.

Presently, some developers intentionally provide engineered location maps on their marketing brochures to mislead home buyers into believing that the projects are located in attractive districts.

Meanwhile, developers should make information about transactions by people associated with the developer available to the public, the housing chief said.

To balance the need for privacy, a developer may not necessarily reveal the identities of people who have bought a unit or units in its projects. But it needs to publish the prices and details of the units involved, she said.

Eva Cheng announced the initiatives after she was questioned by legislators late last month on why the use of misleading or false information to manipulate prices is heavily penalized in the stock market but not in the property market.

The question was raised following reports that only one transaction involving a single flat at Henderson Land Development's 39 Conduit Road luxury project had been registered with the Land Registry despite an earlier claim by the developer that transaction contracts had been signed for 25 flats of the project.

China Daily

(HK Edition 04/13/2010 page2)