Veteran economist says international, local buyers won't be able to fill void left by Chinese nationals in various development projects after China curbs capital flight.
PETALING JAYA: A veteran economist believes there will be a surge in abandoned property projects in Johor, Kuala Lumpur and Penang following China’s crackdown on capital flight.
Speaking to FMT, Hoo Ke Ping said China’s aggressive measures against capital flight would affect property developers – both local and international – who catered to house buyers from China.
“Chinese nationals who have purchased homes but haven’t finished paying for them may not be able to do so.”
He said China’s central bank may force those who purchased homes outside of China to finish paying their loans in China.
“Even if Chinese buyers account for only 20% of a project and they can’t continue paying their instalments and default, a developer is bound to run into cash flow problems.
“What is certain is that there won’t be any new sales. So there is a possibility that projects which cater to Chinese nationals could end up being abandoned.”
Hoo said even though Chinese developers like Country Garden – the developer of the massive Forest City project in Johor – were looking to other international buyers to fill the void left by the Chinese, it would be an uphill task.
“People from the Middle East are unlikely to fill the void given current oil prices while Europeans and Australians haven’t shown any interest in coming to Malaysia in a big way all this while.”
Hoo said locals too wouldn’t take up the homes.
“These homes were built for the Chinese market. They cost over a million ringgit. How many locals can afford them?
“So now the developers need to slash prices to salvage the situation.
“But even if they slash prices by 20%, it may still be out of reach for many.”
Hoo said he believed the situation would persist for at least three years as it was crucial for China to control its capital flight.
Earlier it was reported that the Forest City project in Johor may face difficulties with Country Garden closing all sales centres in mainland China.
Forest City is a futuristic smart city project to be built on four man-made islands spanning 1,385.6 hectares.
Costing RM100 billion, it is expected to be completed within 20 years and will have a range of facilities, including housing units, offices and shopping malls.
Alan Ho, a former sales agent at Country Garden’s Malaysian operations, said about 90% of Forest City buyers were from China.