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Chinese property investors target Malaysia

China has eclipsed Singapore as the biggest source of investment in Malaysian real estate, as soaring domestic property prices push mainland investors to hunt for bargains abroad.

Chinese groups have invested more than $2.1bn in Malaysian real estate over the past three years, compared with $985m invested by Singaporean companies between 2014 and 2016, according to figures from Real Capital Analytics based on completed transactions of $10m and above.

Malaysia has emerged as a favoured destination for mainland Chinese investors seeking a cheaper alternative to Australia and Hong Kong. 

Singapore has traditionally been one of the biggest outbound real estate investors in Asia and the biggest foreign investor in neighbouring Malaysia, but China has stepped up its investment at a time when warmer political ties between Beijing and Kuala Lumpur have eased commercial relations. 

Malaysia, home to a large ethnic Chinese diaspora dating back generations, has attracted a wave of Chinese expatriates drawn by the promise of unpolluted skies, a low cost of living, and proximity to Singapore’s shopping and nightlife. 

“The Chinese investor today has a lot more options and has become more comfortable going to Europe and the US, but not everyone has the same options — Malaysia is much more affordable,” said Sigrid Zialcita, managing director of Asia-Pacific research at Cushman & Wakefield. 

“If you compare prices, even between Malaysia and China, you are looking at a significant difference,” she added. Property prices in top-tier Chinese cities such as Beijing, Shanghai and Shenzhen have soared over the past year and are some of the most expensive in the world.

The close economic ties between Malaysia and China were underlined this week when Alibaba announced it would set up a regional logistics hub near Kuala Lumpur airport, part of a digital free trade zone launched by Malaysian prime minister Najib Razak and Alibaba founder Jack Ma. 

Some 8,000 Chinese citizens have been granted the right to live indefinitely in Malaysia under a foreign residency programme launched in 2002 and targeted at pensioners, Malaysia’s tourism minister revealed on Wednesday. 

Chinese are the single biggest nationality to have taken advantage of the policy, known as Malaysia My Second Home, followed by 4,000 Japanese, out of a total of nearly 32,000 foreigners granted residency since the scheme began.

The boom in Chinese investment is visible in the skyline of southern Malaysia, where the massive Forest City development is taking shape on reclaimed land just across the causeway from Singapore. 

However, Forest City developer Country Garden and other Chinese property investors in Malaysia could be vulnerable to Beijing’s crackdown on capital flight. 

Country Garden recently closed showrooms in mainland China for its flagship Malaysia project in response to Chinese regulatory measures that have made it harder for individuals to move money out of the country. 

The developer is planning a marketing push in Southeast Asia, Dubai, Taiwan and Japan as it seeks a more diverse customer base. 

Globally, China’s overseas investment in real estate rose to a new high last year. Overseas investment from China in residential, commercial and industrial property totalled $33bn in 2016, according to real estate group JLL. 

The US was the most popular destination for investment, drawing $14.3bn, followed by Hong Kong, Malaysia, and Australia, while the UK was in fifth place, JLL said.

Via FT