Sales of properties have been exuberant in recent years, with property prices setting records, from time to time. According to the Land Registry's statistics, there were 7,498 cases of sales of first-hand residential properties in the first five months of 2017, totalling value of $105.9 billion, representing over 80% increase of the figures recorded in the same period last year. As purchasing a property is a significant decision in anyone's lifetime, and the financial burden has never been greater, only by obtaining adequate and accurate information can consumers compare different development projects and make the right choice according to their affordability.
The Residential Properties (First-hand Sales) Ordinance (the Ordinance) came into effect in 2013, aiming to set out requirements in relation to the disclosure of sales information so that prospective purchasers can obtain adequate, accurate and highly transparent information to support their purchase and to strengthen consumer protection as a result.
In 2014, the Consumer Council released an in-depth study report which identified a number of trade practices in the sales arrangements of first-hand residential properties that worth improvement. The Council recommended developers to produce a "consolidated" information list, including units for sale and prices, and transaction records for reference of prospective purchasers. Besides, developers were recommended to enhance transparency in sales information disclosure, as well as to improve the order at the sales offices of the first-hand residential properties. Subsequently, the Sales of First-hand Residential Properties Authority (SRPA) and the Estate Agents Authority (EAA) have implemented a series of targeted measures to further improve the sales arrangements.
To gauge whether consumers could obtain adequate and accurate sales information of the properties in the buoyant first-hand residential property market, the Council sent out staff members, from November 2015 to March 2017, posing as prospective purchasers, to conduct field visits at the sales offices of 9 first-hand residential development projects as well as to assess whether the accuracy of information obtained on-site was, in fact, in compliance with the Ordinance. According to the information from the Sales of First-hand Residential Properties Electronic Platform, these 9 field visits accounted for 12% of the 73 development projects and 18% of the total number of units during the period. Results revealed rooms for improvement over the sales practices of these new properties.
Consumption tables are hard to access and read
The SRPA required developers, from June 2015 onwards, to display, in the sales office a "consumption table," stating dates of sale, the number of units in the development available for selection, the total number of units for which Preliminary Agreements for Sale and Purchase (PASP) had been signed, and the total number of units selected by consumers who have not yet signed the PASP. The Council however found that although the developers displayed the consumption tables according to the stipulated requirement, prospective purchasers still found it difficult to access and read such information in the table comprehensively. For instance, 1 developer displayed the consumption table only at the ballot area located in the display hall, so that only the prospective buyers who had already submitted cashier orders for registrations of intent and about to participate in balloting could obtain the information. There were developers who had the consumption tables displayed at more appropriate locations. However, different versions of the consumption tables updated over time were merely stacked together. Should prospective purchasers want to obtain a comprehensive view of the overall sales situation, they had to compare the consumption tables page by page.
The consumption table, being one of the improvement measures implemented, only provides information on the sales of units. Prospective purchasers have to go through other sales documents (such as price lists and register of transactions) to obtain essential information of the property such as saleable area, transaction price and price per square foot. The Council calls on developers to expand the scope of information disclosure in the consumption table and enhance its completeness. For the convenience of prospective purchasers, information could be disseminated through various channels, such as a digital platform with real-time updates that allows access of timely information for informed choice.
Incorrect and confusing information in self-formatted consumption tables
Although the Ordinance has stipulated specific formats for sales documents such as sales brochures and price lists to ensure information accuracy, the Council found that the sales agents encountered in all the field visits, including staff of developers and estate agents, proactively offered "self-formatted" consumption tables or "simplified" versions of promotional materials, with wordings such as "for internal reference" or "not for the purpose of sale" to prospective purchasers.
From the "self-formatted" consumption tables obtained from 7 development projects surveyed, incorrect information could be easily detected. For example, a consumption table "self-formatted" by an estate agent had wrongly cited a "2-room" unit which was in fact a unit with "1 room plus store room"; in another case, unit price for the same unit, based on per-square-foot price, on different floors in the same building of the "self-formatted" consumption table was marked at least $800,000 less. Should prospective purchasers rely solely on the information provided by the "self-formatted" consumption table, they could be easily confused and affected in the decision.
Or worse, there were estate agents dissuaded the Council staff from obtaining the information stipulated in the Ordinance e.g. sales brochures, price list, etc. claiming such information was of little reference value. In fact, all information for the sales of first-hand residential properties is regulated by the Ordinance, no one is allowed to provide deceitful or misleading sales information.
Sales arrangements of estate agents need improvement
Despite that the EAA had strengthened sales guidelines for estate agents, alleged malpractices continued to happen occasionally. During the Council's field visits, it was found that an estate agent took the risk, by suggesting offering loans to consumers with additional cashier order, in order to improve chances at the drawing of lots. Moreover, there were quite a number of estate agents not wearing badges or staff cards at different sales locations, making it difficult for the visitors to differentiate licensed estate agents from non-licensed employees of the estate agent companies.
The Council recommends that the authorities should refine the scope and transparency of information disclosure for consumption tables, so that prospective purchasers can better understand the information of the prices and sales status of any property. It is also recommended that on-site inspection and regulatory control on the industry's sales practices be strengthened, to ensure law compliance.
As the property market has become very active and exuberance of property transactions have recorded, the Council reminds consumers that, before they decide to purchase a property, they should carefully evaluate their own personal needs and potential risks especially in relation to the impact on personal affordability once the interest rate rises. Besides, consumers should study and compare the sales documents of different projects carefully, e.g. sales brochure and price list, before making a decision.
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