Tuesday, March 8, 2011

More can be done to curb showflat tricks

THE Government is planning to introduce new guidelines on promotional materials for new homes, to help buyers make better decisions.

National Development Minister Mah Bow Tan announced in Parliament last week that tougher rules are on the cards to ensure that showflats built by developers to market new homes look like the apartments that eventually get built.

Mr Mah's statement follows an announcement from the Urban Redevelopment Authority (URA) last month that it was reviewing the Housing Developers (Control & Licensing) Act and Housing Developers Rules to provide 'more accurate and transparent information on housing projects'.

One area of concern relates to showflats. There are currently no guidelines for these display units built by developers to market new projects.

With no hard and fast rules, developers here sometimes take artistic licence with display homes by removing structural walls and columns and raising ceilings to make the unit look bigger.

The space housing the air-conditioner ledge and planter box is sometimes included as part of the showflat area.

The Housing Developers (Control & Licensing) Act does list certain requirements for print advertisements, stipulating that a print ad must include details such as the developer's name and licence number and the date when buyers can get their keys.

These rules, however, do not touch on the truthfulness of marketing material, such as accurately drawn maps. Nor do they seek to prevent embellished artists' impressions.

Maps in advertisements are thus often not drawn to scale, with MRT stations and other amenities placed closer than they actually are. Stunning views are included in artists' impressions while unsightly landmarks are omitted.

It seems timely then that the Government has decided to nip a nascent problem in the bud. As was noted in Parliament, developers elsewhere have been known to build smaller-frame beds and place them in a show unit to make the bedroom appear spacious.

In Singapore, the Advertising Standards Authority of Singapore - an advisory council under the Consumers Association of Singapore (Case) - said it received 20 complaints relating to property advertisements over the past two years. Since 2009, Case has also received one complaint relating to discrepancies between a showflat and the actual apartment.

The numbers are still small, but there are undoubtedly others similarly aggrieved who may not know who to turn to: the Real Estate Developers Association of Singapore, the URA or possibly even Case? This is in fact one area the guidelines can spell out - how aggrieved buyers can seek redress.

There is a need for more transparency in marketing properties with the sale of tiny 'shoebox' homes of less than 500 sq ft booming in recent years.

Shoebox flats made up 12 per cent of new non-landed private home sales last year, up sharply from 2 per cent in 2007, according to data from property consultancy Cushman & Wakefield.

Buyers of these homes - many with Housing Board addresses - are often attracted to the low total price of the tiny units. This group may consist of less savvy, or first-time property investors.

Showflat tricks could lead to buyers stretching their life savings to pay for a unit they later find out is so small it is hard to live in or rent out. In shoebox units, where every inch of space counts, a small discrepancy can make the difference between cramped and comfortable.

Some simple guidelines will help give buyers peace of mind.

As Mr Mah has noted, there should be requirements for site plans to be drawn to scale. Showflats should also represent the actual size of the units.

The guidelines can go further to prevent developers and their marketing agencies from getting away with visual tricks.

For example, if a project says that it is 10 minutes away from the city, it should stipulate whether it is by foot, car, or MRT, and make sure the claim is credible. And if Marina Bay Sands or other stunning city icons will not be visible from any of the development's windows, then artists' impressions should not be allowed to feature them.

Developers should also be encouraged to showcase flat types that make up the majority of their development's offering, not an atypical unit, such as a ground floor unit which may make the area look larger since it comes with a private enclosed space.

Another issue requiring guidelines is that of Soho - or small office, home office - units, which are gaining popularity with investors.

In fact, the term 'Soho' is a marketing term used by developers and their agents. It does not refer to a specific development type that the URA grants approval for. Marketing agents will say Soho units can double as office space, and can fetch higher rent, in order to justify the higher sales price.

When the project is completed, however, the developer might not provide adequate support for the units to be converted into offices. Some buyers may find that their application for home office use is rejected depending on the nature of the business they want to register, or if approved, later reversed if the business receives complaints from neighbours.

Rules governing the marketing of Soho projects should be clarified to ensure that agents do not overpromise or overstate the merits of their products.

Penalties for flouting the new guidelines should also be severe enough to deter misrepresentation.

Developers and their marketing agents will have to realise that promotional materials to market properties are aids to help buyers make sensible decisions on million-dollar investments - and not occasions for marketing gurus or designers to indulge in wild flights of imagination.

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