Enforcing the law for a more transparent property market

By Property Soul

Since my letter to The Straits Times Forum in December 2014 regarding the accuracy problem of private property transaction data, URA had replied about improving the property market data and releasing the nett prices of individual units sold by developers by the first half of 2015.

In URA’s 1 April 2015 press release, there were six major changes in the revision of the URA Property Price Index that promised higher representation of transactions and more meaningful comparisons among projects.

On May 18, URA finally put together the last missing piece by enforcing the publish of actual transacted prices of uncompleted private properties sold directly by developers. There are also new rules that were amendments to the Housing Developers (Control and Licensing) Act passed in April 2013.

New rules announced by URA on May 18

Below is a summary of the URA’s press release on ‘Fostering a more transparent property market’.

ura_rules

The first two rules are somewhat expected since they have been mentioned by URA earlier.

The long-awaited transparent property transaction prices are now available with the compulsory submission of actual selling prices of units bought directly from developers – less all the stamp duty absorption, legal subsidy, cash rebate, rental guarantee, purchase incentive, etc. offered by the developer.

Developer tricks deployed in show units

A more interesting rule that comes into effect on July 20 is the requirement of accurate depiction of the show units.

As I have pointed it out in my book No B.S. Guide to Property Investment, there are countless tricks used by developers in show flats to make the units look spacious:

1. Replace a brick wall with a glass panel separating the living room and an adjacent bedroom;

2. Remove the wall separating two bedrooms to join together for a bigger room in order to hide a tiny bedroom;

3. Miss the wall and door of the kitchen, or show an open kitchen which is ‘an ID concept for display only’;

4. Extend the living room all the way to the balcony;

5. Build a ceiling higher than the actual units;

6. Miss the doors for all bedrooms and bathrooms;

7. Hide any pillar, beam or air-con ledge that exists in the original flat;

8. Minimize width of walls and depth of wardrobes for a more spacious bedroom;

9. Showrooms, furniture and appliances not built to scale; and

10. Place full-length wall mirrors, install see-through wardrobes or place transparent-color furniture.

Enforcement is the key word, not just fostering

Back in April 2013, Parliament has already approved amendments to the Housing Developers (Control and Licensing) Act to improve safeguards for buyers of uncompleted private residential properties.

Besides providing the public with better information on the private residential property market, the Housing Developers (Show Unit) Rules also require show flats to follow the same dimensions of structural walls and ceiling height as approved in the building plan.

The amended Act also empowers the Controller of Housing to investigate cases of non-compliance. For non-compliance, the maximum fine imposed on developers is raised from $20,000 to $100,000 while subjecting to an imprisonment term of up to 3 years.

But the questions are: Did we notice any difference in developer show flats at all in the new project launches? Have we heard about any incidence of non-compliance and fine being imposed since passing of the act?

While we appreciate the government’s efforts in introducing new rules to protect the interests of home buyers, it is also critical to see how the authority implement them effectively to meet the original objectives of the safeguards.

In a nutshell, while a truly transparent property market can enable prospective home buyers to make better-informed purchasing decisions, the rights of the consumers can only be protected through strict enforcement of the laws by the relevant authority, especially when people are buying off plans in uncompleted residential projects.

This article was first published at propertysoul.com