New World Development brand trust undented despite construction woe headlines, say industry folks

Recently, making headlines all across Hong Kong's news portals was brand New World Development and its project The Pavilia Farm at Tai Wai. The brand was shoved into the spotlight for having to tear down two of its blocks due to defects found in the towers. The developer has since then announced recovery plans for affected buyers and allocated compensation of up to 7.6% of their purchase price. Although the incident shocked buyers across the Hong Kong market, industry players MARKETING-INTERACTIVE spoke to say that potential homebuyers in the future will not shy away from the developer as Hong Kong has comprehensive systems to protect them. 

Sammy Po, chief executive of Midland Realty's residential division, said New World Development showed responsibility in its reaction with its promise of compensation to homebuyers. "After reviewing the extra subsidy and mortgage interest compensation, I believe that such arrangements are reasonable and the number of homebuyers who decided to cancel their transactions will remain single digit," he said. 

The Pavilia Farm, located at Tai Wai, is currently one of Hong Kong best selling residential property project. According to a statement by MTR Corporation, which co-developed the project with New World Development, the concrete walls in the podium of two blocks — namely blocks one and eight, both of them are part of The Pavilia Farm III — did not meet "the requirements of the approved design" found during concrete strength tests.

New World Development said in a statement on 3 July that it received a report from the project contractor, Hip Seng Group of Companies, which found that the concrete strength in sections of the wall base beneath tower one and eight did not meet the requirements of the approved design. Three days later, the company reported the incident to MTR and the Buildings Department of the Hong Kong government, prior to deciding to demolish and rebuild the two buildings. In addition, New World Development instructed the contractor to investigate the cause of the incident thoroughly, including if there was any human negligence and supervisory liability. It also immediately replaced the relevant project supervision team.

Although the developer said only two buildings under construction in The Pavilia Farm III were involved, it admitted that the company was informed by the project contractor in mid-June that the concrete test data from sections of the wall structure in tower eight did not meet the requirements. After an inspection on 3 July, the company confirmed the concrete strength in sections of the wall base did not meet the necessary standards and decided to demolish the buildings. 

"New World Development's decision to demolish and rebuild the two blocks along with the compensation scheme for its buyers showed accountability and commitment to buyers. However, the latest revelation suggesting that the company consciously continued to sell new flats without disclosing any potential structural concerns despite its internal reports will hurt its credibility. As the company has offered buyers to cancel their purchase, it was considered as an appropriate remedial action," said Clara Shek, managing director, public relations and influence, Ogilvy Hong Kong.

As a result, the occupancy date will delay by about nine months. To compensate, New World Development offered two choices to buyers: Completing the agreement for sale and purchase or cancelling the transaction immediately. With either option, buyers will receive an extra subsidy and mortgage interest compensation. Meanwhile, the developer will ensure that the completed buildings in the same phase meet all relevant legal and statutory standards for construction quality and safety, while commissioning an independent third party to inspect the apartments and certify that they are safe before handing them over to buyers. According to a report from rthk, among the affected 846 homebuyers, about 40% of them are investors.

Po further elaborated that the generous compensation is expected to be accepted by many of the buyers as it offers. "I think the public will still remain confident about the company in the future," Po explained.

Meanwhile, Louis Chan, vice chairman and chief executive officer (residential), Asia Pacific, Centaline Property Agency also said that the developer proactively announced the news, demonstrating its determination to be responsible for this incident. Hongkongers focus mainly on the price of properties, and Hong Kong boasts comprehensive protection for homebuyers purchasing completed or uncompleted first-hand residential properties.

"The incident might alert potential homebuyers in the future, but I believe that it is just an isolated case," he commented.  

Shek advised that there are several actions that brands need to take into account during crises. "Care, transparency, accountability, and commitment are crucial to protecting the reputation of any organisation. To rebuild trust, it’s important that the company demonstrates transparency and conviction to quality in its future deeds, not just words. Timely disclosure of information affecting buyers and quality assurance count," Shek added.