Published April 3, 2007

HK developers facing new pressure

Many complain ads overstate size of flats in comparison with actual units


HONG KONG developers are under new pressure to curb unfair sales tactics or face losing self-regulation of the industry.

Sales push: An advertisement of a property development goes on display in HK. The govt has said it may mull legislation if developers skirt self-regulation

Foul play in marketing and selling flats came under fire in a stand-off between lawmakers and developer groups yesterday. 'In Hong Kong you get more protection buying canned food than a flat,' said legislator Albert Cheng.

There have been many complaints that the size of flats is grossly overstated compared with what buyers actually get. A 2000 government white paper on the subject is yet to lead to legislation, fuelling claims that the administration is shielding developers to the detriment of consumers.

Lawmakers like Leung Kwok-hung yesterday chided the government for failing to protect consumers: 'The calculation (of flat size) is very simple. It's just simple division, yet you keep asking consumers to work it out for themselves.'

Some developers market flats using gross floor area (GFA) while others use saleable area (SA). GFA includes common areas and SA, which itself includes features such as bay windows and balconies. Some developers are ambiguous about what they include in GFA and SA.

Both vary depending on the developer and flat for sale, making it difficult for consumers to make meaningful comparisons when shopping for an apartment.

The Hong Kong Institute of Surveyors (HKIS) has proposed beefing up the definition of SA. But some lawmakers want legislation so people know exactly the size of flat they are buying. People need to know how much usable space they are getting, said legislator Mr Ho.

The Consumer Council has received more than 800 complaints about properties since 2005. Consumer groups have been lobbying for more than a decade for clear rules on definitions of flat size.

In a 2000 submission to the government, the Consumer Council said: 'We are aware of the fact that many potential purchasers would regard the calculation of saleable area measuring from the external edge of the enclosing walls but including the internal walls and other permanent partitions within the properties as inadequate. A majority would prefer to be informed of the internal floor area instead.'

The government has said it would consider legislation if developers skirt self-regulation by industry body, the Real Estate Developers Association. But not all developers are association members, and critics say the association lacks teeth anyway.

'We have always said in the past if self-regulation fails we will consider introducing legislative proposals in the Legislative Council again,' said lawmaker Kwok Ka-ki. Consumer complaints come against a backdrop of sluggish sales of mass residential property, which slipped almost 3 per cent last year.

Some players expect a slight upturn this year, though nothing close to the 20 per cent anticipated growth of the luxury residential sector.