JOHOR BARU – The Prime Minister’s announcement that foreigners will be barred from buying properties at the multi-billion-ringgit Forest City has sparked a scramble among developers and buyers.
They want more details and greater clarity on the government’s seemingly new policy.
The Chinese developer of Forest City, Country Garden Pacificview Sdn Bhd (CGPV), said Tun Dr Mahathir Mohamad’s decision did not match what was discussed at a closed-door meeting on Aug 16.
It was held between the Prime Minister and founder and chairman of Country Garden Holdings Yeung Kwok Keung prior to Dr Mahathir’s visit to China.
“At the meeting, Dr Mahathir reiterated that he welcomed foreign investments which could create job opportunities and promote technology transfer and innovations that could benefit Malaysia’s economic growth and job creation,” said a CGPV statement yesterday.
The developer of the project in Gelang Patah said it had complied with all laws and regulations and had the necessary approvals to sell to foreign property buyers.
It said pursuant to Section 433B of the National Land Code, a foreign citizen or a foreign company could acquire land in Malaysia subject to the state authority approval.
“We do not issue any permanent residency (PR) to the foreign buyers,” the statement read.
“We are currently in touch with the Prime Minister’s Office for clarification as we believe Dr Mahathir’s comments may have been taken out of context in certain media reports.”
Yesterday, Dr Mahathir said he was against the idea of building a city for foreigners.
Speaking at the Cities 4.0 and Business 4.0 International Conference and Exhibition, he said Forest City was not built for Malaysians.
“One thing is certain – the city that is going to be built cannot be sold to foreigners. Our objection is because it was built for foreigners and was not meant for Malaysians. Most Malaysians are unable to buy those flats,” he said.
His statement was interpreted to mean that Malaysia was prohibiting foreigners from buying the residential units at Forest City, which were largely sold to mainland Chinese buyers.
Having just returned from China, where he invited Chinese firms to invest in Malaysia, Dr Mahathir’s comment stirred confusion.
Forest City is a joint venture between the Guangdong-based developer and Esplanada Danga 88 Sdn Bhd, an associate company of Kumpulan Prasarana Rakyat Johor.
Spanning 13.86sq km on four man-made islands, Forest City has been touted as a “global destination” and a smart and intelligent city near the second link bridge of Iskandar Malaysia and adjacent to Singapore.
According to South China Morning Post, shares of Country Garden Holdings see-sawed in yesterday’s trading amid confusion over Dr Mahathir’s comments.
The stock, which had risen by as much as 3.9% earlier, returned almost all of its gains for the day on the Hong Kong exchange following Dr Mahathir’s comments.
KGV International Property Consultants (M) Sdn Bhd director Samuel Tan Wee Cheng said the ruling should be implemented after the government had discussed with the stakeholders.
“A sudden announcement like this is sending a wrong signal to foreigners planning to buy residential properties in Iskandar Malaysia,” he said.
Johor Real Estate and Housing Developers Association branch chairman Datuk Steve Chong Yoon On said clarification would help clear uncertainty and confusion over the project’s status.
COUNTRY GARDEN SHARES SEE-SAW AMID CONFUSION OVER MAHATHIR’S BAN ON FOREIGN OWNERSHIP
Shares of Country Garden Holdings, the developer of the biggest private residential township in southern Malaysia, see-sawed in Monday trading amid confusion over comments by the country’s prime minister about letting foreigners buy property in the Forest City project.
The project, located on four artificial islands near Singapore, is being built by the Foshan-based Chinese developer, and has been sold predominantly to Chinese investors who have been enticed to the project by long-stay, non-permanent visas that buyers can apply for.
“One thing is certain, that the city that is going to be built cannot be sold to foreigners,” Malaysian premier Mahathir Mohamad said during a media conference in Kuala Lumpur, according to a report by Reuters. “We are not going to give visas for people to come and live here.”
The stock, which had risen by as much as 3.9 per cent earlier on Monday, returned almost all of its gains for the day on the Hong Kong exchange after Mahathir’s comments were published. The Malaysian premier’s office in Putrajaya, outside Kuala Lumpur, did not immediately respond to requests for clarification.
As many as 1,439 Chinese citizens received such visas in the first eight months of 2017, top among all recipients under the programme, and five times more than South Korea in second place, according to data by the Malaysian tourism ministry, which hosts the programme.
To be sure, Mahathir himself appeared to have endorsed both the long-stay visa and the Forest City project during his August 16 visit to China, according to Country Garden.
The prime minister and Country Garden’s founder Yeung Kwok Keung “had a 40-minute closed door meeting”, during which Mahathir “reiterated that he welcomes foreign investments which could create employment opportunities, promote technology transfer and innovation that could benefit Malaysia’s economic growth and job creation”, said the company’s director of strategy, Ng Zhu Hann.
The premier’s comment “may have been taken out of context”, Country Garden said in a statement issued after the Reuters report, adding that it was seeking clarification with the Malaysian Prime Minister’s Office.
That is small comfort for Patricia Li of Yunnan province who, like tens of thousands of other middle-class Chinese property buyers, have flocked to buy in Forest City in the hope of eventually being able to settle in Malaysia. Li bought a 48 square metre (516 sq ft) unfinished flat in Forest City last year, and moved to Johor with her son early this year.
“We all know the project has been popular among Chinese investors, all because it would make our dream of having a second home abroad come true via buying an apartment here,” Li said. “We think the new government is unfriendly to us Chinese buyers. Even those China-backed infrastructure projects have been cancelled, let alone our private investments.”
Country Garden has two real estate projects in Malaysia: the Forest City project in Johor state near Singapore, and the Diamond City project in Selangor state near Kuala Lumpur. The company has sold close to 10,000 property units for a total sales value of 25 billion yuan (US$3.66 billion), or for an average cost of between 15,000 yuan and 20,000 yuan per square metre, according to an estimate by Raymond Cheng, head of Hong Kong and China research at CGS-CIMB Securities. That is more than double the square footage price in other comparable projects, even including those in the capital city.
“Nearly 90 per cent of the buyers are mainlanders who bought because the property comes with residency rights in Malaysia,” Cheng said. “Local residents can barely afford buying there. If it shifts to Malaysians, the price may need to be cut” to a fraction of the prevailing quotation, he said.
Forest City will eventually house 700,000 residents over an area four times the size of New York’s Central Park, measuring 14 sq km when fully completed. The project is forecast to generate 6 billion yuan in sales for Country Garden this year, less than 3 per cent of the company’s 2017 revenue and less than 1 per cent of its projected turnover this year, according to CGS-CIMB Securities’ Cheng.
“No doubt that is extremely bad news for the company,” said Mizuho Securities Asia analyst Alan Jin. “It is not a total surprise as there has been criticism from the Malaysian government of the project since the new prime minister took power.”
– ANN
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