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Following is a question by the Hon Tony Tse and a written reply by the Secretary for Transport and Housing, Professor Anthony Cheung Bing-leung, in the Legislative Council today (May 21):
Question:
The Residential Properties (First-hand Sales) Ordinance (Cap. 621), which has been fully implemented since April 29, 2013, provides that property sizes and per-square-foot/per-square-metre property prices may only be quoted on the basis of saleable area (SA) in sales brochures, price lists and advertisements of completed and uncompleted first-hand residential properties. In addition, the Estate Agents Authority (EAA) issued a practice circular in May 2012, requiring estate agent practitioners to provide their clients of second-hand residential properties with area and price information on SA with effect from January 1, 2013. In reply to the question of a Member of this Council on January 23, 2013, the Secretary for Transport and Housing stated his belief that gradually, the second-hand residential property market would present floor area and price information of properties predominantly in SA only. In this connection, will the Government inform this Council:
(1) whether it knows the number of cases of contravention of the aforesaid practice circular by estate agents which EAA uncovered since it issued the circular, and the number of relevant complaints EAA received; of the follow-up actions taken by EAA on such cases;
(2) whether it has assessed the latest situation of the second-hand residential property market "gradually presenting floor area and price information of properties predominantly in SA only" and when that goal will be reached; if it has assessed, of the outcome; if not, the reasons for that and whether it will conduct such an assessment;
(3) whether it will extend the ambit of the requirement that "property sizes and per-square-foot/per-square-metre property prices may only be quoted on the basis of SA" to cover second-hand residential properties, so that there is a uniform requirement in the residential property market; if it will, of the details and implementation timetable; if not, the reasons for that; and
(4) whether it has assessed the prospective changes to the significance, role and function of gross floor area in the residential property market; if it has assessed, of the outcome and corresponding measures; if not, the reasons for that?
Reply:
President,
The Government is endeavoured to maintain a transparent and open residential property market to protect the interests of the residential property purchasers and vendors.
All along, there was no standardised definition of gross floor area (GFA) for residential properties. Prior to the implementation of the Residential Properties (First-hand Sales) Ordinance (the Ordinance), a vendor may use the GFA to describe the area of a residential property when selling his first-hand residential property. Generally speaking, the vendor may include the saleable area (SA), the area of bay windows, and the apportioned share of common areas in calculating the GFA of a residential property. As different vendors might include different common areas of a development project as apportioned to individual units in the calculation of the GFA of a residential unit, it would therefore be difficult for prospective buyers to compare the size and price of a residential property on a uniform basis by relying on the GFA of a residential property.
As regards the area of residential properties, prospective buyers would most likely wish to know the SA of a residential property. To this end, the Government standardised the definition of SA of the first-hand residential properties on October 10, 2008. By way of the Lands Department Consent Scheme ("the Consent Scheme") and the guidelines of the Real Estate Developers Association of Hong Kong, the Government required vendors to provide the standardised SA when selling uncompleted first-hand residential properties under the Consent Scheme.
The Estate Agents Authority (EAA) issued a practice circular in May 2011 requiring estate agents to provide prospective purchasers of first-hand residential properties with information regarding the area of the property and the price per square foot or square metre in SA as contained in the price list(s) supplied by the developer. Also, the EAA issued another practice circular in May 2012 requiring estate agents, with effect from January 1, 2013, to provide clients of the second-hand residential properties with area and price information on SA. Since then, buyers have been able to obtain information about the floor area as well as price per square foot/square metre expressed in terms of SA for both first-hand and second-hand residential properties.
During the legislative process to regulate the sale of first-hand residential properties in 2012, the Government introduced provisions into the Ordinance requiring the vendors selling their first-hand residential properties in their developments situated in Hong Kong to use only SA in expressing the area of their first-hand residential properties and the prices of the properties per square foot or per square metre in sales brochures, price list and advertisement purporting to promote the sale of any first-hand residential properties. The Ordinance came into full operation on April 29, 2013. It is an offence for the vendors to breach the relevant provisions of the Ordinance.
I hereby set forth our response to the four-part question asked by the Hon Tse:
(1) The EAA has been closely monitoring the implementation of the requirement for estate agents to provide SA for second-hand residential properties. Since January 1, 2013, when the relevant practice circular came into effect, the EAA has, up to April 30, 2014, conducted checks at 1 784 estate agency shops (note). As regards the advertisement in newspapers, magazines and online advertisements, the EAA has also conducted 774 checks. During the period, the EAA discovered 95 non-compliant cases and received 11 complaints. Among the 95 non-compliant cases, 90 of them took place in the first half of 2013 (i.e. the early stage after the practice circular came into effect). The relevant estate agency shops had rectified their practice after receiving the EAA's advice. As for the remaining five non-compliant cases that took place after the first half of 2013, one of the cases was found substantiated. The punishment by way of reprimand and a fine of $1,000 was imposed. Two cases were found not substantiated. Currently, two outstanding cases are still being investigated. Besides, the EAA has completed the investigation of 11 complaints mentioned above, which also took place in the first half of 2013. After receiving the EAA's advice, the relevant estate agency shops had also rectified their practice.
(2), (3) and (4) Landlords of the second-hand residential properties have long been using the GFA and the SA simultaneously in expressing the area of their properties. As such, it will take more time to promote the use of only SA to express the area and price of a residential property for the second-hand residential property market.
In fact, after the Ordinance has come into operation, information on the floor area of any first-hand residential properties has been expressed in SA instead of GFA. There will not be any more information on the GFA when these properties are subsequently put up for sale in the second-hand market. Therefore, the number and proportion of residential properties in the second-hand market expressed in SA but not GFA is believed to increase gradually. Besides, SA has become a common benchmark for property buyers to compare the size and price of different second-hand residential properties. With the passage of time, the information of size and price of the majority of residential units in the second-hand market will be expressed in SA only. It is therefore considered not necessary to mandate the use of SA as the only means to express the size and price of second hand residential properties for the time being.
On the other hand, the EAA has required all estate agents to provide second-hand residential property buyers with the property's SA and price information calculated in SA. The EAA considers that the trade has largely followed the relevant practice circular in complying with this requirement. The EAA will review the implementation of the relevant guidelines from time to time.
The Government will continue to work closely with the EAA and the stakeholders, through enforcement and education, to encourage the use of SA as the only standard to express the size and price of second-hand residential properties.
Note: As at April 30, 2014, there were 6 247 estate agency shops.
Ends/Wednesday, May 21, 2014
Issued at HKT 14:35
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