Huge Malaysia housing projects just one way Chinese demand reshaping SE Asia

By Zhang Yu Source:Global Times Published: 2016/12/8 19:08:39

Huge Malaysia project just one way Chinese demand reshaping SE Asia




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Zhang Chun (pseudonym), a newspaper's real estate editor who was recently invited to visit the city of Johor Bahru, Malaysia to inspect a Chinese construction project there along  with Chinese buyers, was amazed at the buying power of his compatriots.

"It's staggering how quick these Chinese make decisions. They don't hesitate - the seven families I went with bought six apartments, and they signed the contracts so swiftly. Two families didn't even bother to check out what the model units looked like," Zhang said.

The real estate project he visited is called Forest City. Developed by Country Garden, a Guangdong Province-based property development company, the 250 billion yuan ($36 billion) project is located on four man-made islands on the southern tip of Malaysia, offering waterfront high-rises and villas with a staggering 700,000 residential units. Just 2 kilometers from the Singapore border, it touts access to both the city state's world-class educational system and Malaysia's low cost of living.

"Next to Singapore" is Country Garden's publicity slogan for the massive project in the second largest city in Malaysia, and since last year, commercials for the project can been seen in metro stations in China's major cities and national television, showcasing its forest-like design.

Zhang said many Chinese, who mostly visit the project while on package tours to Southeast Asia, buy the houses for investment purposes, while some plan to use the apartments as holiday homes in the future.

Potential homebuyers view a scale model of the Forest City development project in Malaysia's second largest city Johor Bahru. Photo: CFP

Potential homebuyers view a scale model of the Forest City development project in Malaysia's second largest city Johor Bahru. Photo: CFP





Buyer tsunami



Forest City is just one example of how the property buying spree of Chinese investors has extended to Southeast Asia. As China's currency weakens and the growth rate of China's domestic real estate market slows down, more and more Chinese buyers are now buying properties abroad, and the relatively affordable houses in Southeast Asia are their latest choice.

Chinese property demand is set to soar in Southeast Asia, according to a report by juwai.com, a website which introduces foreign properties to Chinese buyers. "From super luxury apartments in Singapore's CBD to seaside houses in Thai villages, the diversified properties in Southeast Asia can satisfy buyers with various budgets and motivations," Jan Kot, Greater China region general manager of juwai.com, told the Global Times.

Statistics from juwai.com show that inquiries about properties in Malaysia soared 193 percent in the first 11 months this year from the same period last year, with page views of Malaysian properties listed online growing 52.4 percent. The average price of Malaysian properties searched for by Chinese buyers hovers at around $225,000.

Queries about Cambodian properties have grown by five times year on year. "The property markets in Cambodia and Vietnam have great growth potential as both countries are seeing rapid GDP growth as their manufacturing sectors grow. The two countries are expected to be major destinations for offshore investment in the coming years," Kot said.

Elvison Ng, a manager at the Kuala Lumpur-based Prestige Realty, said they have seen ever more Chinese customers interested in Malaysia's housing market. "Malaysia's housing prices are currently at a low level due to Malaysia's currency depreciation. But this means it's a great opportunity for foreigners to invest here, and we've seen a growing number of foreign investors coming in recent years," he told the Global Times.

He added that Malaysia's foreign residency scheme, called "Malaysia My Second Home," which makes it relatively easier for foreigners to get citizenship compared with similar schemes in other countries, is also a major draw attracting Chinese buyers.

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Influx



Forest City isn't Country Garden's first real estate project in Johor Bahru. In 2013, it started preselling properties that were part of a project called Danga Bay, marking Chinese developers' first project in the city. In its promotion materials, Country Garden says 6,000 of the project's 9,000 units were sold within two months after its launch.

Since then, many Chinese developers, including the Hong Kong-listed R&F Properties and Shanghai-based Greenland Holding Group, started to build properties in the Malaysian city, hoping it could become the next Shenzhen, which became a metropolis in the 1980s in part because of its position next to Hong Kong. For Johor Bahru, Singapore would be its Hong Kong.

But not every Chinese developer has succeeded. R&F Property's Princess Cove project, 15 blocks of luxury apartments which will be completed by 2017, for example, is seen by many analysts as a failure as it wasn't able to attract enough buyers. Reports and rumors of the project being stalled were spread widely last year, but were later denied by the company.

Last year, the State-owned Greenland Holding Group started building two housing projects, Greenland Tebrau and Greenland Danga Bay, in Iskandar Malaysia, as part of its efforts to follow the One Belt and One Road Initiative. Its purchase of 128 acres of land is the most expensive land transaction to-date in Johor Bahru.

Apart from property developers, China is also taking on a role in building Malaysia's infrastructure under the Belt and Road initiative. China Railway Construction, for example, was last year awarded an electrified rail project between Gemas and Johor Bahru, and in the past three years, Chinese construction companies have won billions of dollars' worth of contracts.

Last month, during Malaysian Prime Minister Najib Razak's trip to China, China and Malaysia agreed that bilateral ties are in their best period ever, and that the two countries will seek further cooperation in regional infrastructure projects.

Depressing market



The influx of Chinese developers, however, has created unease among local developers and real estate agents as they fear the massive number of residential units built by Chinese developers in Johor Bahru will depress the market.

Supply has skyrocketed in Johor Bahru from an average of 7,000 to 8,000 new housing units every year before the arrival of Chinese developers to 39,000 new units last year, Datuk Seri FD Iskandar, president of Real Estate and Housing Developers' Association Malaysia, said in a forum this month, according to the New Strait Times, a Malaysian newspaper.

Last month, Bloomberg reported that the oversupply of housing units has led to a drop of one-third in the average transaction price of houses last year.

An annual report by Malaysian property consultant CH Williams Talhar & Wong shows that average high-rise residential prices in Johor Bahru dropped 10 percent in 2015 compared to a year before, reflecting softened demand. It also predicts that the occupancy rate of new high-rises completed in 2015 and 2016 will continue to drop.

Commentators also worry that if the real estate market in Johor Bahru goes down, the rest of the country might follow, leading to a nationwide slow down.

The rapid growth in supply in Johor Bahru also alarmed Singapore. Lawrence Wong, Monetary Authority of Singapore (MAS) board, said in the Singapore parliament last May that the over 330,000 new residential units in Iskandar Malaysia, which outnumber the total number of private homes in Singapore, will likely drive prices down, the Straits Times reported.

Despite these issues, Chinese developers still seem to have outshone their local counterparts in winning the favor of the Malaysian government. Country Garden, for example, was given a series of preferential policies including tax incentives, as well as a special Immigration and Quarantine (CIQ) facility at the Singapore and Malaysia Customs.

This Tuesday, when Malaysian Prime Minister Najib Razak visited Johor to examine the projects in the state, he stopped at Forest City and praised the project for propelling the economy, creating jobs, and helping with tourism in the country.

"This project has a huge potential," Najib told reporters during the visit.

Local developers, lacking this preferential treatment, are now hoping that they can get the same favorable treatment as their Chinese counterparts. "We are an open market - we definitely want foreign investments (for growth). Whether we like it or not, China is the big boy today," FD Iskandar was quoted as saying in the forum.

"If tax incentives and pioneer status were given to foreign developers, I hope those incentives are given to Malaysian developers as well. We want a level-playing field," he said.


Newspaper headline: Real estate rush


Posted in: IN-DEPTH

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