The Residential Properties (First-hand Sales) Ordinance (the Ordinance), which aims to shield buyers from dishonest sales practices, came into full effect on 29 April 2013. The Ordinance mainly applies to first-hand residential properties and sets out detailed requirements in seven main areas, including sales brochures, price lists, show flats, disclosure of transaction information, advertisements, sales arrangements, and the mandatory provisions for the Preliminary Agreement for Sale and Purchase and Agreement for Sale and Purchase for the sales of first-hand residential properties. The Ordinance is also a prohibition against misrepresentation and the dissemination of false or misleading information.
Developers put extra effort into selling remaining units before the new regulations took effect. Some even cut prices and offer beneficiary packages to accelerate sales because they are required to develop new brochures even for selling remaining units after 29 April 2013.
Thomas Lam, Director and Head of Research & Consultancy, Greater China at Knight Frank, says only major developers have launched primary units after the new regulation has been in force. For instance, Swire Properties and Henderson Land launched Dunbar Place in Ho Man Tin and Green Code in Fanling respectively, whereas small to medium-sized developers will wait and see, delaying primary launch. We expect only a limited number of primary residential units to be launched in the coming 2 to 3 months. Primary residential sales will therefore hover at low levels in the near future.
Thomas expects that the Ordinance to suppress residential supply of both new projects and remaining primary units. Due to the various stamp duty policies which targeted to suppress investment and speculation demand, now the market is dominated by end-users, but their purchasing power has been largely absorbed due to developers’ active clearance of remaining units before the ordinance’s implementation. The market needs some time to recover and accumulate purchasing power again.
With the effect of the implementation of the new regulations and various stamp duties, Knight Frank foresees that mass residential prices will drop 10%, while luxury residential prices will experience a mild downward movement of 5% over 2013. Overall, residential transaction volume will drop 10% this year. However, different districts may record various performances.