News : Unravelling a million-ringgit puzzle

2017 Jun 17

MAK, a national Chinese, had paid the RM60,000 downpayment for a new RM2mil residential unit.

The Malaysian agent tried to help Mak secure a loan with several banks, both local and foreign, among which are two Chinese banks. The news that kept coming back was not good.

Finally, the property agent asked: “Will you be able to finance this RM2mil purchase with cash, if you are unable to secure a loan?”

Yes. The next question is, how is he going to get the money out of China?

Early this year, Beijing imposed capital controls to stem the outflow of funds which was depleting its foreign reserves.

Under the new rules, Chinese nationals were allowed to transfer up to a maximum of US$50,000 per person per year. Initially, some of the buyers plan to “borrow” the quota from family and relatives to pay for the properties purchased abroad. Subsequent additional new rules put paid to “borrowing” and “lending” of quotas. The new rules also prohibited transfer of funds for buying of insurance/investmenttype of products and real estate.

Says an agent who has been representing Malaysian developers abroad, Metro Homes director K.L. See: “The banks will not allow a Chinese national to transfer even the US$50,000 abroad unless it is for medical and educational purposes. Purchase of properties is prohibited.”

Chinese property buyers can be broadly divided into two groups – the super rich who buy in the US, Britain and Australia; and the average folks from middle-class families who buy in parts of Asia. As one agent puts it, the uncles and aunties in their 50s and 60s like South-East Asia.

Although this group is not rich, they perceive prime Malaysian properties at RM1,200 to RM1,600 per sq ft (psf) around the Kuala Lumpur City Centre area and water-front projects in Johor Iskandar Malaysia as “cheap” compared to Beijing and Shanghai real estate where prime residential locations can be as high as between RM5,000 and RM6,000 psf.

See says the middle-class Chinese feel comfortable buying in SouthEast Asia and they particularly like Malaysia. Although they come from a big country, they consider Malaysia as a “big” country with various nearby interesting destinations they can travel to.

“They also feel that Malaysians are more friendly,” says See.

They feel “at home” because they are comfortable with buying properties from Chinese developers who arrived in Malaysia some five years ago to go into property development in a fairly big way. This is particularly so in the economic corridor Iskandar Malaysia in Johor.

According to Johor/Klang Valley real estate agents who deal directly with these buyers on a daily basis, most of them prefer to buy from Chinese developers.

Those who buy into projects by Malaysian developers are “very negligible”, they say.

The consensus among property consultants and agents ... if the capital controls were to hurt anyone, it would hurt the Chinese developers more than the Malaysian developers.

Chinese developers with projects in Malaysia include Guangzhou R&F Properties, Agile group, Zhuoda Real Estate Group, Hao Yuan Investment Pte Ltd with Country Garden Holdings Co Ltd planning to reclaim some 4,000 acres on the Johor Straits, and Shanghai-based state-owned Greenland Group.

Although Iskandar Malaysia was their first stop, there were concerns that these Chinese developers would move into the Klang Valley and Penang in similar fashion with massive projects.

The consensus among property consultants ... so far, that has not happened although it may still be early days yet as the Bandar Malaysia development is still unravelling.

Says a source: “We hear about them (Chinese developers and investors) coming into the Klang Valley but we don’t know very much about that either.

“In the same way, when news of the capital controls filtered out, there were nagging questions how these controls would impact the Chinese developers who were already in Malaysia and what is the ripple effect on the broader property market.

“We have people saying this will impact Country Garden’s Forest City but we did not see the outward signs of this ‘badness’. Therefore, what is important today is for us to ask, what is really happening, and to have answers,” the source says.

The story now returns to Mak, and how he is going to pay the remaining 90% of the RM2mil property in cash.

There was a time when credit or debit cards were swiped to buy properties but this may not work now as banks have restricted the amount transacted.

Using the services of money changers is a black market operation and illegal, although some may still do that.

Says a source familiar with forex transactions: “Recent crackdowns have resulted in people losing money as there is no legal recourse on the money deposited into the account of an individual providing that forex service.”

We will leave Mak with the RM1.94mil puzzle.


source : The Star Malaysia, 17 June 2017

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