Tougher rules for Hong Kong property developers

03-02-2012

New property laws are to be introduced in Hong Kong to protect buyers of new homes.  Unscrupulous developers in the former British colony are known for misleading overstatement of floor space for new-builds and off-plan projects. The Hong Kong government wants to crack down on this underhand practice, where developers include public spaces, such as lift lobbies, clubhouses and electricity plants in the gross floor area of a flat when they price and promote it.

This new law is currently being consulted over, and it is hoped that it will become legislation within the first quarter of 2012. Developers who break this legislation will be punished with a fine of between HK$100,000 and HK$5 million and a possible 7 years in prison depending on the perceived view of the offence.

Once the law is passed, developers will have to provide a price for a property at least three days before it goes on sale, and a sales brochure on each development at least seven days before sales begin.  This brochure will have to list the property’s address and the area it is in, and would not be allowed to contain artist’s impressions of the development.

It may however also put a further dampener on property prices, which have already stalled due to other legislation, including special stamp duty and extending land supply.  This is especially clear in the second hand market where the number of transactions has dropped from an average of 12,000 flats per month to 4,000 since the Special Stamp Duty measure has been introduced. It is predicted that residential property prices will fall a further 20% in the next 12 months.