Hong Kong property agents told to warn homebuyers of the risks of buying off-plan units in mainland China, overseas markets

Promotional materials must include a bilingual caution down the lines of ‘Assess the risks before you buy!’
Agents must also seek advice from lawyers based in location of the property in question, under new Estate Agents Authority guidelines

Hong Kong property

Yulu Ao

Published: 7:30pm, 28 Dec 2023

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Estate agents in Hong Kong have been told they must warn people eyeing houses in mainland China and other markets outside the city of the risks associated with buying off-plan.

As the mainland’s property market has lurched from crisis to crisis, with some major developers mired in debt, it has become increasingly common for projects under construction to be left unfinished.

Hong Kong’s Estate Agents Authority (EAA) issued a set of guidelines to property agents on Thursday with the aim of helping local residents avoid the risk of buying a home that remains uncompleted or a unit that fails to deliver the promised rental return.

The new guidelines, set to come into effect next summer, will require licensed estate agents to obtain a legal opinion from a lawyer practising in the place where the unfinished property is situated. Their advice must cover due diligence on the vendor and the property, and other key information, according to a press release issued by the EAA on Thursday.

In addition, the advertisements and promotional materials for such properties must include a bilingual caution to consumers down the lines of “To buy or not to buy non-local off-plan properties? Assess the risks before you buy!”.

This must be displayed prominently in a specified manner, the EAA said.

Licensees who fail to comply with the new requirements may be disciplined by the EAA. Possible sanctions include reprimands, fines, licence suspension or revocation, the agency said.

“The measures are considerate,” said Alan Cheng, Centaline Property Agency’s CEO for southern China and its general manager in Shenzhen.

“The main purpose of the new notice is to protect the interests of Hong Kong customers. The intention is good.”

The new rules will take effective from July 1 next year and will completely replace previous guidelines that have been in place since 2017, according to the EAA.

“The EAA considers it necessary to draw to consumers’ attention the differences between the handling of [unfinished properties outside Hong Kong] by licensees and non-licensees,” said Ruby Hon, the chief executive officer of the EAA, in the press release.

She said the move is designed “to strengthen consumer protection within the EAA’s purview and enhance consumers’ confidence in engaging licensees in their purchase”.

It also aims to “promote the professionalism of licensees by making improvements to the requirements in the old circular,” she added.

Since the border was reopened earlier in 2023 after almost three years of Covid restrictions, Hong Kong residents have shown an increased appetite for mainland Chinese properties. With many of them being off-plan, this has led to a flurry of complaints on social media about problematic house purchases.

There were 61 complaints involving seven property projects in mainland China in 2022, according to data released by the EAA. They were related to developers failing to complete construction according to the original schedule or failing to provide guaranteed rental returns.

Nomura estimated that there were around 20 million pre-sold units that were either yet to be built or faced construction delays in China – equivalent to 20 times the size of Country Garden’s projects at the end of 2022 – according to a research note issued by the investment bank in mid-November.