Chinese buyers will spread the full invoice to a collective group in their property purchase

By IZZAT RATNA / Pic By BLOOMBERG

The capping of overseas property investment by China’s government early this year may have slowed sales in Malaysia but Chinese investors may have found a way to tiptoe their way around the rules.

Buyers from China have been among the largest investors in the country’s residential property market, especially in the last four years.

Beijing early this year had imposed a restriction for property purchases abroad to stem the outflow of their currency. But the RM212,000 (US$50,000) purchase limit per year remains unchanged.

Malaysian Institute of Estate Agents president Eric Lim said there is a drop in transactions for residential sales to China’s citizens since the clampdown to restrict investment on properties.

However, he said the Chinese buyers have become more creative in their property purchases since Beijing’s action, by spreading the invoice to a collective group or seeking a more progressive instalment method, which would take three to four years upon full invoice.

“Because of the RM212,000 limit per person, a lot of them normally split the full payment between three and four household members, as this makes up for a more flexible end-financing regime,” he told The Malaysian Reserve (TMR).

Data from the country’s Ministry of Commerce and Industry showed that China’s real estate investment in foreign countries fell 82.1% in the first half of 2017, suggesting Beijing’s move has been effective to stem capital flight.

According to Knight Frank Malaysia, about 35% of residential land transactions were carried out by foreign buyers in the last five years, which the majority came from the Chinese mainland.

Chinese developers have also been strong in the country. Companies like Country Garden Holdings Co Ltd, Greenland Holdings Group Ltd, R&F Properties Co Ltd, Macrolink Real Estate Co and Agile Property Holdings Ltd have bought land for residential projects mainly in Kuala Lumpur, Johor and Penang.

Country Garden’s RM424 billion Forest City project in Johor is the largest under-taken by Chinese property developer. Built on four artificial islands, the development will have a population of about 700,000 people.

However, the Chinese property developer had closed sales centres to promote its Johor project due to Beijing’s curb on capital flight.

The company said last month that it had made almost zero home sales to Chinese buyers for the project since shutting down its sales centres, according to a Reuters report.

Country Garden said sales for the first six months from the Forest City project was six billion yuan (RM3.84 billion).

But, Lim said Chinese buyers have been more careful in their investments especially in terms of location, the developer and amenities before any transaction takes place.

“The current education boom is also one of the pull factors to continue to attract property purchases from the Chinese,” he told TMR.

Local properties also offers price advantage in comparison to other cities like Sydney, Hong Kong and the UK.

Real estate agency Savills Malaysia deputy executive chairman Allan Soo said Chinese buyers are expected to continue to be a dominant foreign player in real estate over the long-term period.

Given the current soft market sentiment, Soo said that Chinese stakeholders — developers and purchasers — have a wider market reach with higher purchasing power.