First blood amid sales scrap

Editorial | Mary Ma 20 May 2019

The Sales of First-hand Residential Properties Authority's prosecution of a leading developer involved in selling units through tender was unavoidable. The subject matter has been blinking on the government's radar for a while.

It could be anyone, since selling by way of tender has become such a trend that the practice is no longer confined to the St Martin project in Pak Shek Kok, Tai Po.

Selling of small and medium-size flats by way of tender has been a cause of growing concern because home buyers participating in a bid are often deprived of some information essential for them to make an educated decision.

The authority is now telling us it has clamped down on someone for allegedly breaking the regulation that, when it was enacted, was written to ensure a high level of transparency in the market to safeguard home purchasers' interests.

In its statement, the authority said a summons had been served on the developer of a project in Pak Shek Kok, Tai Po. The development was reported to be St Martin. Sun Hung Kai Properties - the developer - may say it was unlucky to have been singled out for censure.

The accusation alleges that units were offered for sale by way of tender without sufficient transparency in the sales process, while the payment terms weren't fully disclosed in the official register of transactions as they should have been.

The case is scheduled to be heard at the Kwun Tong Court in July. If convicted, the developer could be fined up to HK$500,000.

The prosecution is merely symbolic, since even if the maximum amount was levied by the court, it would represent pocket change for SHKP, Hong Kong's largest development company whose market capitalization exceeds HK$388 billion.

However, it would be impossible to estimate the damage the court case could inflict to its corporate image.

The Real Estate Developers Association of Hong Kong is fully aware of the government's serious concern over the proliferation of the use of tender in marketing new units, and has been trying to promote self-discipline to put a halt to the notorious trend.

As I've commented before, the industry's earlier undertaking to commit members to launching their projects with the first batch - of no less than 20 percent of all units available -- being sold publicly was only a welcome start.

It's encouraging to see them now taking the matter a step further to limit the use of tender to luxury units, only so that others built for the masses would have to be sold publicly.

The outstanding question is where to draw the line appropriately to differentiate the products?

Should a flat of 1,076 square feet be considered luxury, as suggested by the developers' association?

Or should a luxury unit be any flat with three bedrooms or more - regardless of size - as countered by some developers?

If the latter is to be adopted, it's certain that there would be a rush to partition even small cubicles into three-bedroom "luxury" flats.

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