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Consumer Council Advocates for Comprehensive Strengthening of Regulation on First-hand Residential Properties Outside Hong Kong Urging for Sales by Licensed Estate Agents and Stringent Regulation of Information Provision to Safeguard Purchaser Interests

  • 2021.10.28

Consumers’ demand for properties situated outside Hong Kong (“POH”) has seen a steady climb in the past 30 years. Local buyers favour POH for various purposes, from investment, retirement, to acquiring homes for children studying outside of Hong Kong. The free flow of money together with low interest rates worldwide further fuelled this trend. In the wake of the promulgation of the Central Government’s 24 Policy measures, which promoted the development of the Guangdong-Hong Kong-Macao Greater Bay Area (“GBA”) and increased the connectivity and transportation within the GBA cities, it is anticipated that more Hong Kong people will live and work in the GBA “one-hour living circle” in the future, further fanning the desire to purchase POH.

In the light of a growing POH market in Hong Kong, the Law Reform Commission (LRC) published a report back in the late 1990s which proposed legislation to curb misleading advertisements for overseas uncompleted residential properties advertised or offered for sale in Hong Kong. The report also recommended that all sales of non-local uncompleted residential properties should be handled by licensed estate agents in Hong Kong, with the exception of the sale of a single dwelling by a private individual.  The Estate Agents Authority (EAA) was established in 1997 to regulate the industry through the implementation of a licensing system under the Estate Agents Ordinance (“EAO”). However, as regulation of estate agents carrying out estate agency work in relation to local properties was accorded a higher priority, estate agents and salespersons dealing exclusively with POH were exempted from obtaining a licence as long as they fulfilled certain requirements under the Estate Agents (Exemption from Licensing) Order (the “Exemption Order”), which was enacted thereafter. Therefore, unlicensed estate agents and salespersons (“unlicensed estate agents / salespersons”) can also provide POH services to consumers. Purchasing POH often entails high stakes involving millions of dollars, higher risks and uncertain factors. With a view to safeguarding consumer rights, the Consumer Council (the “Council”) reviewed the current legislations and regulations from multiple perspectives to identify weaknesses, conducted analyses to see whether unfair trade practices occurred within the industry. The findings were compiled in the “Purchase of Properties Outside Hong Kong – A Study on Enhancing Consumer Protection” report released today (28 October 2021).

The findings of the report revealed that in addition to licensed estate agents and salespersons, unlicensed agents exempted from licensing as well as developers outside Hong Kong which are not governed by the EAO, currently carry out POH sales in Hong Kong. From information provided in advertisements or the direct sales process, it is difficult for general consumers to identify whether the agent or salesperson is licensed or not, reflecting the presence of regulatory gaps. The information provided by the industry was also found to be inadequate in comprehensiveness and accuracy, while the wording used for the exemption disclaimer lacked uniformity. Further findings included exaggerated and misleading advertising tactics, in addition to the lack of a protection mechanism such as cooling-off period for deposits and reservation fees. The report thus puts forward 5 recommendations to strengthen the regulation of POH sales in Hong Kong to protect the interests of consumers at large.

This report reviewed the sales practices and regulatory legislations in relation to POH sales in Hong Kong; and analysed the related complaint statistics received by the Council and relevant authorities to identify the difficulties and sales traps faced by consumers. When compiling this report, a survey of advertisements placed in print media, online platform and TV was conducted; mystery visits to 20 traders involving 36 POH projects to obtain first-hand information such as the latest trade practices was also carried out; and research and benchmarking of the current legislations and regulations were done against 7 other jurisdictions.

Current Legislation and Licensing Requirements Cannot Comprehensively Regulate POH Sales

Current legislations and regulatory framework governing POH sales activities in Hong Kong include the EAO and the Exemption Order, the Practice Circular issued by the EAA, collective investment scheme (“CIS”) under the Securities and Futures Ordinance (“SFO”), and the Trade Descriptions Ordinance (“TDO”). Amongst these, according to the EAO, only estate agents and salespersons licensed by the EAA may conduct estate agency work in relation to properties both in and outside of Hong Kong. However, the Exemption Order specifies that any estate agent or salesperson dealing with estate agency work exclusively in relation to POH can be exempted from obtaining a licence from the EAA or complying with the regulations of the salesperson’s licence, as long as they provide an exemption disclaimer in all relevant invoices, leaflets, brochures and advertisements stating that he is not licensed to deal with any property situated in Hong Kong (the “exemption disclaimer”).

In 2017, the EAA issued a Practice Circular No. 17-03 (CR) (the “Practice Circular”) requiring licensed estate agents and salespersons to follow mandatory guidelines on the sale of Uncompleted Properties Outside Hong Kong (“UPOH”), namely to obtain due diligence (“DD”) report(s) on the vendor and its project; provide a written legal opinion and relevant sales documents; and follow prescribed regulations on the content of advertisements and promotional materials. Licensees who fail to comply are subject to disciplinary sanctions. However, the Practice Circular only applies to UPOH while unlicensed agents and developers outside Hong Kong are not regulated by the provisions of the EAO.

The report pointed out that the practice of allowing unlicensed agents and salespersons to sell POH under the Exemption Order and the Practice Circular being only applicable to licensees is unsatisfactory and is indicative of a regulatory loophole, as both licensed and unlicensed estate agents and salespersons can offer POH sales services. Even worse, licensed agents can also employ unlicensed salespersons. Not only would this undermine consumer protection, the lack of clarity of the salesperson’s licensing status could also cause confusion and mislead consumers into thinking that the POH sales are handled by licensed salespersons, potentially affecting their judgment.

As unlicensed estate agents or salespersons do not need to abide by the EAA’s requirements for licensees, the regulatory disparity makes it more difficult to regulate their sales practices and conduct. Based on the findings of both the POH advertisements survey and the mystery visits, non-compliance of relevant ordinances was more notable amongst unlicensed agents and salespersons. For example, many unlicensed salespersons did not declare that they were unlicensed on promotional materials or their name card as required by the Exemption Order.

Furthermore, regulations on promotional and advertising content of POH should not apply to licensed estate agents only. Currently developers from different jurisdictions could market their projects directly in Hong Kong without using any local estate agents as intermediaries. At the same time, as developers outside Hong Kong do not fall under the definition of “carrying out estate agency work” in Hong Kong, they are bound by neither the EAA and EAO, nor the Practice Circular, making it difficult for the EAA to regulate any potential sales misconduct.

Soaring Complaint Figures Relating to POH Sales

The report reviewed POH-related complaint statistics from 2017 to 2020 received from related regulatory bodies, namely, the Police, the Customs and Excise Department (C&ED), the EAA, the Securities and Futures Commission of Hong Kong (“SFC”), as well as the Council, which reveal an overall rising trend. From 2017 to August 2021, the Council received a total of 261 consumer complaints, with an average loss of HK$368,000 and the average value of the property affected was close to HK$1.8 million. It can also be observed from the Council’s complaint figures that 75% of the complainants learnt about the POH developments through local newspaper advertisements; nearly 70% of them attended the sales exhibition or talks organised by agents; while 93% of the transactions took place in Hong Kong. Furthermore, close to 90% of the cases involved estate agents, amongst which 60% involved unlicensed agents. Complaint types included the provision of inaccurate or misleading information, absence or omission of material information, and difficulties in obtaining a refund of the reservation fee or deposits paid by purchasers.

Exaggerated and Misleading Advertisements, Confusing Exemption Disclaimers

As purchasers are in general unfamiliar with the purchase of POH, they relied heavily on information provided in advertisements across different mediums. Between November to December 2020, the Council reviewed around 1,300 POH advertisements placed by developers or estate agents in print media, online platform, and TV. The survey showed that 98% of the print and 60% of online advertisements included local contact details, thus there existed a strong Hong Kong element.

The Council’s analysis of the relevant advertisement content exposed various problems, including ambiguous and misleading content of advertisements, such as claims of immigration shortcuts, or using advantages, free gifts, and interest-free instalments as bait. From the Council’s complaint cases and the advertisements survey, it was found that many traders used rental guarantees or unrealistically high rental returns as a bait to lure consumers. However, some of these projects could possibly be a CIS, the sale of which could have the risk of breaching the SFO if prior authorisation or approval had not been sought from the SFC. The survey also revealed a lack of uniformity of the wording used for the exemption disclaimer. The exemption disclaimer was found in nearly 35% of the print advertisements, meaning they were unlicensed estate agents. Only around 25% of the advertisements provided the licence number, yet over half of these also inserted the exemption disclaimer, indicating that these licensed agents in fact employed unlicensed salespersons. All these different ways of expression could be confusing for consumers. A lack of font size regulation on disclaimers was also observed in print advertisements, amongst which 10% had blurred and illegible details, whereas for online advertisements, it was found that the exemption disclaimers were often placed at the end of the advertisements. As readers could only read them after scrolling down many pages, these disclaimers could easily be missed. 

Inaccurate or Misleading Information Provided by Salespersons

After the pandemic situation had relatively eased, the Council conducted mystery visits to 20 traders involving 36 POH projects in 8 jurisdictions to identify the industry’s trade practices and to obtain direct consumer experience in the various issues arising out of the POH sales process. The surveyed traders included 1 developer and 19 agents, of which 15 were unlicensed, yet only 3 of the unlicensed agents displayed the exemption disclaimer on the pamphlets, leaflets and/or salespersons’ name cards respectively. As for the remaining 12 unlicensed agents, they did not provide any such information, making it difficult for consumers to identify whether the estate agent encountered was licensed or not.

The survey also found that 90% of the traders inserted liability disclaimers in the sales documents, such as brochures, pamphlets and leaflets, so as to avoid liability in relation to the accuracy of the contents. However, as none of the salespersons drew the mystery visitors’ attention to the existence of these disclaimers, it appears that the inclusion of such liability disclaimers was solely for the purpose of protecting the traders. Furthermore, as there is currently no mandatory requirement on unlicensed agents to conduct due diligence (“DD”) before taking up a project, as is required for licensed agents, the accuracy of the information provided by unlicensed agents during the mystery visits was doubtful. During such visits, there were unlicensed agents who provided outdated or even inaccurate information; in 2 of the mystery visits, the salespersons only provided brochures and leaflets written in Japanese, and went on to claim that despite not speaking the language, they could still guess the meaning due to their professed experience in the sale of Japanese properties.

Amongst the 19 surveyed agents, only 1 proactively disclosed their relationship with the developer and expressed that the client did not need to pay commission. Only upon further enquiry by the mystery shoppers did the remaining 18 salespersons eventually disclose details of commission payment. It was also found that most of the salespersons did not give any warning to potential purchasers in relation to the buy-and-sell risks of POH and missed legal or professional advice. This raises concern for the quality of the salespersons and highlights their failure to provide adequate and timely information for prospective purchasers to make informed choices.

Strengthen Regulation Through Referencing Other Jurisdictions

The Council reviewed the regulatory regimes of 7 other jurisdictions in relation to POH sales, covering Australia (New South Wales), Canada (British Columbia) (“BC”), Mainland China, Malaysia, Singapore, Taiwan and the UK. It was observed that there are more stringent legislations and guidelines in place in regulating the marketing and advertisement of POH. In 4 of the researched jurisdictions (BC, Malaysia, Singapore, Taiwan), licensing requirements have been imposed on estate agents selling POH and licensed estate agents have the obligation to carry out DD on POH before marketing the properties for sale. This offers a higher level of protection for consumers as compared to current Hong Kong legislation, which regulates licensed estate agents and salespersons in the sale of UPOH only. In particular, BC requires that deposit monies be put in a stake-holding trust account which would ensure that these monies cannot be used for the construction of the development. It also mandates a 7-day cooling-off requirement for deposits to safeguard the interests of purchasers.

Upon reviewing the findings, it was observed that most of the identified issues related to first-hand residential POH, sharing similar potential risks and involving a much higher consumer interest. For second-hand residential POH, in most cases the vendors are individuals but not developers, making each case unique and bearing case-specific potential risks. On the other hand, purchases of non-residential/commercial POH are usually made by investors and they usually include offices, hotels and shopping malls which need to be managed by others and may involve rental returns or guarantees, thus would more likely fall within the ambit of a CIS regulated by the SFC. Therefore, the 5 recommendations put forward by the Council intend to focus on the sale of first-hand residential POH. The key points are summarised as follows:

Recommendation 1: To require all estate agents who engage in the sale of first-hand residential POH to be licensed under the EAO

Owing to a loophole in the current regulatory regime that allows unlicensed agents and salespersons to carry out the sale and purchase of POH under the Exemption Order, they would hardly be regulated by the EAOif any issues involving the transaction arise. Furthermore, licenced agents can also employ unlicensed salespersons to solely handle the sales of POH, causing confusion for consumers. The Council recommends that Section 2(a) of the Exemption Order that exempts a person who does anything referred to in section 15 or 16 of the EAO from the requirement of obtaining an estate agent’s licence or a salesperson’s licence if he “does so exclusively in relation to properties outside Hong Kong”, be amended to “does so exclusively in relation to properties outside Hong Kong save and except first-hand residential properties.”, thus placing all agents and salespersons dealing with first-hand residential POH under the regulation of the EAO. The Council firmly believes that the introduction of such an amendment will bring a much more transparent and fairer marketplace for the estate agents to compete and to enhance the quality of services and safeguard for consumers. 

Recommendation 2: To impose the existing statutory duties concerning the provision of information to purchasers and the regulation of advertisements under the EAO on estate agents who engage in the sale of first-hand residential POH

The Council recommends that statutory duties be imposed on estate agents who engage in the sale of first-hand residential POH in accordance with the EAO. This would include extending regulations and guidelines on information disclosure and regulation of the content of advertisements laid out in sections 36 and 44 of the EAO, which currently only apply to residential properties in Hong Kong, to also apply to first-hand residential POH.

Recommendation 3: By binding EAA guidelines, prescribe the information to be provided to purchasers, and regulate the content of advertisements for first-hand residential POH

The Council recommends that the Practice Circular be amended and modified to impose more requirements in the content of the 4 main documents for potential purchasers, including the DD report, legal opinion, written warning statement and sales information sheet, and to strengthen the requirements on advertisement contents:

  • DD Report – to include the name, the authority and the professional qualifications of its issuer, and to state the date up to which the contained information are confirmed to ensure the report is reasonably up-to-date and the most accurate. The estate agents should also be requested to summarise those adverse, or potentially adverse, findings in a separate document so that the attention of the potential purchasers could be fully drawn to them before proceeding with the transaction;
  • Legal Opinion – to be extended to state whether there is any mechanism to safeguard the deposits in accordance with local laws and regulations, or any restrictions on non-locals to finance the property locally;
  • Warning Statement – to include additional warnings to the purchasers about potential risks, such as exchange rate fluctuation, loan facilities, inability of the vendor to honourany guarantees or rental yields, delay in property delivery, restrictions for non-locals to purchase at the place where the development is situated, etc. Potential purchasers must also be reminded that some information received during the sales stage may not be legally binding;
  • Sales Information Sheet – the map or plan provided should be drawn to scale and adopt a standard definition to measure the area; to state the particulars of any rights of way to the POH and the restriction of their use; and to provide a web link to the relevant legislation/regulatory authorities governing the POH, etc., so as to ensure that consumers are sufficiently and accurately informed of the information and potential risks of purchasing POH;
  • Advertisement requirements – in addition to existing requirements, advertisements should clearly and legibly state certain essential information; must not exaggerate or make false or misleading representations in material particulars (including the financial position of the developer, actual location and price etc.); and that there should be font size control and period of exposure in presenting prominent warning statement on print and digital/TV medium.

Recommendation 4: Advocating for the introduction of a mandatory cooling-off period for reservation fees 

Purchasing POH involves other jurisdictions and financial arrangements, which can be complex and risky. Given the voluminous information and details provided by salespersons which requires the purchaser time to review before confirming the purchase decision, the Council recommends a cooling-off period of no less than 7 days to be given to prospective purchasers for the reservation fee, so as to allow time for research and enquiry before entering into such a huge commitment. If the prospective purchaser decides to withdraw within the cooling-off period, they should be able to recover the reservation fee wholly or partly. As they have enjoyed an exclusive opportunity to buy the particular property, while the agent or vendor may have incurred loss or expenses as a result of this, the Council is of the view that the agent should be allowed to forfeit a reasonable but not excessive amount from the reservation fee as administration fee based on the principle of fairness and reasonableness.

Recommendation 5: Incremental approach to mandate all sales of first-hand residential POH be conducted through licensed estate agents / salespersons

Based on the principle of free market, the Council understands that there is no legal requirement for local sales of POH to be conducted through estate agents only. Therefore, after thorough consideration by the Council, the study report proposes to focus on recommendations for the sale of first-hand residential POH. Should recommendations 1-4 be implemented, and relevant public education be put in place yet still falls short of providing sufficient safeguard to consumers, such as an increasing number of unfair trade practices, and the failure to encourage consumers to purchase POH through estate agents, then the Council supports a review of the implementation of recommendation 5.  This final recommendation is an incremental approach requiring vendors selling first-hand residential POH in Hong Kong to either obtain a local estate agent licence or partner with local estate agencies, so as to better protect the interests of consumers.


The Council strongly believes that a stringent and thorough regulatory regime for the sales of POH should be in place to safeguard consumers. A multi-pronged approach is necessary, including extensive regulatory legislation, the self-discipline of the industry, combined with ongoing consumer education, so that the market can thrive and benefit Hong Kong's economy as a whole.


Visit  to view the full electronic version of the Purchase of Properties Outside Hong Kong – A Study on Enhancing Consumer Protection” report: