[Music] Malaysia's Forest City was once build as a living Paradise a model of a luxurious eco-friendly and Smart City development for City back in 2016 we considered it as a forward-looking catalytic projects that's a integrated tourism Healthcare Leisure low carbon City but the 100 billion Mega housing project quickly turned into every Investor's nightmare a lot of media has CAU this uh field Mega ghost town city plans are now underway to revive and transform the troubled Forest City project what will it take to revive Malaysia's infamous ghost town it's such a large project I think it
takes a long time you know for big Township to be truly [Music] successful 40-year-old entrepreneur herai was born and raised in Shanghai China but since 2019 19 he has chosen to make Malaysia his home for you herai lives in one of the most well-known developments in Malaysia Forest City a sprawling eco-friendly Metropolis in the south of the state of jeor he owns two units here which he intended to use as Holiday Homes and Investments he has since moved into one apartment permanently last March he launched a company here to handle Parcels for residence but despite
herai's fondness for his new home Forest City has a notorious reputation in the last few years it's gained International attention as Malaysia's Ghost [Music] Town though herai disagrees with this depiction so what is Forest City it's a massive 100 billion high-end residential Community project a mix of luxurious Apartments commercial centers malls hotels and Industrial spaces the project is jointly developed by a renowned Chinese developer Country Garden and Esplanade Danga 88 a local firm backed by the Johor state government and the Sultan of Joor strategically located at the southern tip of jeor just next to Singapore
it's part of an ambitious plan to transform the state into an economic Powerhouse the project is also linked to the belon road initiative or BR China's Mega infrastructure and Trade Network the fact that there was a possibility of very very large investment from China it would help Malaysia to make sure it was part of that belt androll um ecosystem the mega project spans over 20 square kilm sustainability is a key feature with renewable energy sources and water recycling systems it comprises four pieces of uh McMan MC Island uh with the total recation land area of
about 3,000 Acres now this is expected to be completed within 25 to 30 years now this is something very important because a lot of people expect so much from this project and think that it is something to be developed over 5 to 10 years it is not once complete the city is meant to accommodate around 700,000 people at launch its primary target were wealthy Mainland Chinese buyers seeking high-end properties abroad the Forest City developers uh mentioned that if you purchase uh housing unit there uh you can actually have a residence status in Malaysia and so
if you have kids your kids can enter into you know the international schools uh which is part of the amenity provided by the for City and this is a very attractive um point to the Chinese Bears because you know that in China uh Keys uh face very Fierce competition uh in the uh primary schools and high schools because they have to take the college entrance exam and the chance for getting into top schools is pretty small I would say and so at launch in 2014 Forest City generated a lot of buzz by 2016 when construction
was barely underway around 18,000 units were already snapped up Chinese buyers accounted for about 2/3 of these investing overseas uh is a good way to diversify their investment right uh so you know we we all know that you can never put obas all all the EGS into one basket many Mainland Chinese want to get out of China and they want to move their their capital and their wealth out of China because China is restrictive another reason is that if they have residents in more than one country then they there are tax advantages for that if
you're in a country for more than 6 months you are a tax resident you have to pay tax so if they have residence in China they have residence in Malaysia and then they have residence somewhere else that means that they can actually spend less than six months in each country and they they're not a tax resident but then in 2019 the covid-19 pandemic hit causing the project to stall travel restrictions led to a significant decline in demand 35-year-old businessman Muhammad nudin zudin and his wife moved to Forest City just before the pandemic struck having rented
a unit there [Music] [Music] currently only one out of four islands is completed according to Country Gardens figures in 2023 about 9,000 people lived in Forest City just over 1% of the full residential Target however in the areas where construction is finished Forest City feels like any other vibrant residential district of course it's like any other business there are some sector be badly affected by the pandemic so I think property is one of them for properties like for City slowly recover but it take longer time and here there could be good news for the distressed
project when prime minister anoai Ibrahim presented the government's budget last October it included plans to reverse Forest City's [Music] fortunes but how did Forest City Once hailed as a model of Malaysia's Modern urban vision find itself in such a troubled state to begin [Music] [Applause] with 9th May 2018 a momentous date in Malaysia's history former prime minister Dr mahat Muhammad had led the opposition Coalition by pakatan harapan to a stunning victory in Malaysia's 14th general election the six decade rule of the incumbent Coalition barisa nunal was over this was the first transfer of power to
an opposition since Malaysia's independence from Britain in 1957 during the 2018 election campaign the Forest City project became a lightning rod Dr mahat raised concerns about the project saying it facilitated the large influx of Mainland Chinese into Malaysia and criticize the potential impact on sovereignty and Malay interests Mah I mean is uh his style has always been uh isolationist uh and the fact that this is a new uh residential area new township open up primarily for foreigners I think ideologically Mah and I guess his supporters uh against uh this kind of development approach T Mah
does have a reputation for being a very strong Malay Nationalist and uh he cares very much about that agenda but in this case some of the things that he was saying uh were actually true which is to say um there was no obvious impact in terms of creation of employment for Malaysians during the construction phase that was certainly true there's no obvious uh opportunity for Malaysians to buy these properties because the prices are too high at launch the average apartment price of Forest City ranged from 570,000 Malaysian ringot for a one room apartment to 2.6
million Malaysian ringot for a four room apartment for larger units prices ranged from 4.8 to 14 million Malaysian ringot they seemed Out Of Reach for the average Malaysian worker in jall who earned around 40,000 Malaysian ringot annually maha's criticisms struck a hord with voters at a time when the ruling Coalition was blamed for inequality and Corruption however they also sparked concerns among potential investors in the Forest City project it's certainly true that the concerns that he raised um did spook people and I think he he did it for that purpose right because he was before
the election he was interested in raising his profile and um this was part of his campaign once in power as prime minister Dr mahat acted on his earlier threats in September 28 18 He declared that Chinese Nationals would be barred from purchasing residential units in Forest City he rescinded the sales ban about a week later though he maintained that foreign buyers would not easily receive residency visas the previous government gave some negative comments about manyon China people owning free whole property and that deter a lot of investors from coming in especially from China simultaneously developments
elsewhere would have a deeper impact on Forest City in the later half of the 2010s concerns over a property bubble in China were building I think the central government realized that there was overheated housing market and uh in I think 2016 the president shenping mentioned that housing Is For Living it's not for speculating so I think you know this was a turning point of China's housing market and indeed uh after 2016 there were rounds of uh you know cooling measures implemented in many cities in China such as uh imposing home purchase restrictions presidency's 2016 remarks
came after there'd been over a decade of Boom in the Chinese property sector during this time cheap credit was readily available to individuals and companies looking to purchase or build new homes meanwhile buyers saw real estate as an attractive investment option property prices surged on average the average housing price in China increased by about 200 100% from 2000 to 2013 but actually you know the growth rate is totally different in different years of cities so if it's in tier one or tier 2 cities uh the housing price grow rate is much higher than tier three
and tier four cities in first TI cities in China so for example in Beijing from 2006 until 2019 the housing price increased by more than 12 times meaning that the annual growth rate is super high and uh for Shanghai and shenen uh from 2006 to 2019 the housing price increased by more than six times during this period Chinese developers built over 100 billion square fet of residential real estate property developers borrowed aggressively becoming heavily leveraged they also undertook slews of projects overseas like Forest City many developers actually expand very aggressively because there is a competition
in the land market right because for Urban Land uh it's uh it has limited Supply in particular for tier one tier 2 cities right so uh the developers have to compete with each other to beat for land and uh so they do expect you know uh they could quickly build up something and then move to another place to start new constructions then in August of 2020 the hammer fell the Chinese government enacted new Financial regulations placing limits on how much money individuals and large real estate firms could borrow it also reduced how much developers were
allowed to leverage in totality these measures hit China's real estate sector hard in September 2021 Country Gardens rival evergrand missed two offshore debt payments totaling $31 million this was its first default by 2023 evergrand racked up debts of more than $300 billion Country Garden was in similar D Straits the company's total liabilities at the end of June 2023 stood stood at almost $200 billion including 16 billion in offshore debt in October the same year it missed a $15 million Bond coupon repayment as it battled a liquidity [Music] crisis so this actually creates uh High likelihood
of default right and also it creates a lot of Unfinished projects across China so basically even in Beijing right so there are uh I think at least you know 2030 projects that are not really completed the Chinese government simultaneously introduced Capital controls to cap the amount of money that leaves the country for each individual you are not allowed to convert more than uh $50,000 us equivalent to ji uh into foreign currency per year right so uh if uh the enforcement on this uh exchange control uh is tightened actually uh this uh makes the transfer of
money uh more difficult right for buyers to invest in foreign properties so if they're looking overseas to create additional Supply in the market primarily for Chinese um customers then unfortunately the Chinese government would put an end to that by putting restrictions on it China typically also affected by pandemic so the take care have the own before they look at other things right and and that is a huge outflow of money at one point but China Chinese government is looking at how can they look at their own economy State before allowing such thing to to to
continue so they will impose some restriction for money to go offshore so that slow down the whole thing in particular this impacted overseas projects that catered to Chinese buyers like Forest City you must remember all this m Chinese investors they bought their property here in cash they do not get financing because it's difficult for them to get financing and for them to bring out the total amount of money in cash is near impossible unless they Park the money somewhere out of China a walk around Forest City shows how these headwinds have impacted the development currently
only 15% of the entire project has been completed [Music] but perhaps the worst is over there are signs that the Chinese property Market is stabilizing and Malaysia's new madani government under prime minister anoai Ibrahim is also more immigration and investment friendly after change of policy uh in 2018 after covid so investors were waiting we that we are backing this project again so they want to know whether the government we federal government or local or Jo state government that we will honor what we promised to the world we will honor our policy again does Forest City
still deserve its moniker as Malaysia's ghost town and what plans are in place to revive it [Music] real estate agent farizul hatima finds herself a lot busier these days 3 years ago she ventured into real estate parttime to earn some side income that's when she saw an opportunity in forest [Music] [Music] City Facebook TI to can I say agent for demand became so high that far eventually switched to fulltime one of her clients's 27-year-old Insurance executive wafa AA [Music] W just recently she and her husband signed a lease to rent a three room apartment here
in Forest City they were attracted by the affordable rental price so basically uh here I can easily get below 2,000 per month for an apartment with two bathro but other places maybe just an studio um with the same price so it's more I would say uh affordable compared to other places looking at the facilities looking at the environment looking at you know everything here when I view I think it's not the ghost town that people actually been you know be talking about another reason is convenience her husband works and rents a place in Singapore just
across the border from Forest City wafa on the other hand lives in Kang dor but works in joob baru the commute to joob baru town takes nearly 2 hours staying in Forest City would cut her daily commute by more than half and bring her closer to her husband finally I'm not going to uh do long-distant relationship with my husband so that's why I'm so excited to move here with the opportunity that he get which he can commute daily here for a supposed Ghost Town signs of activity are everywhere in Forest City today if you go
into Pro City it's not exactly a ghost town the local are still patronizing the places there for their recreational purposes so it is not really a ghost to but the management has not addressed this issue very well by putting up a more positive narrative on on the development and attraction of for City perhaps uh the criticism to the project is the fact that it was built uh so far so soon and and it uh I think creates over Supply perhaps over supply of of properties in the market maybe that uh was the cause of the
of the criticism as occupancy in Forest City ticked up businesses followed Felix lamb used to work in kale offering internet services to consumer but he decided to relocate to Forest City to meet the growing demand for internet connectivity in the township he also rents an apartment here at 1,500 Malaysian ringot or $336 us a month for his staff [Music] so far 30 condominium blocks have been completed in Phase One along with dozens of landed homes if you happen to have a chance to visit for City uh it's getting better now uh according to the latest
uh my engagement with the management of Forest City there currently about 15,000 to 20,000 people living on the island itself uh that is that's forming a small community uh more supermarkets uh food Outlets daily products shops and uh are trying to open up in the area but this is just one side of Forest City the sites for three of the four planned Islands have yet to be reclaimed initially there were four Islands at the moment only Island one was completed so what I can say is um it face a lot of obstacles uh challenges the
fact of the matter is those buildings are there we don't want it to be an Isa in joho and so we are trying what we can giving them fiscal incentive non-fiscal incentive policy assistance uh to help to revive this project and to make it a success when you have that on such a scale uh as you have uh in Forest City there comes a point when the government can't just leave this huge area there to rot and to crumble right it's not just a waste of resources it's an a terrible shame that you have all
of these units on that are empty ladies and gentlemen to revitalize Pro City the government has designated it into a special Financial zone or sfz the new initiative was officially announced in August last year the goal is to Breathe new life into the project by transforming the city into a hub for international Capital Forest City with its combination of a dutyfree island within a special Financial Zone presents a unique proposition as a catalyst for economic development in the southern region of Malaysia after so many years we we realized that in order to uh revive the
confidence of people be malians or International investors for this region uh we think that we need to introduce a new uh A New Concept into the the islands or into the project itself with the hope that to to really give confidence to investors that the governments are fully backing this project again one plan turns for a city into a destination for Global family officers the goal is to attract ultra wealthy and high Networth individuals into the township a family office is when you start off a business you accumulate your wealth and the wealth sometimes grows
into a certain extent where you need a um well office you know concept like someone there as administrator or maybe as a investment officer to see how to sort of optimize or maximize the wealth that the family has so hence this concept of family office you know came about in Malaysia the single family office can be set up with a minimum of 30 million Malaysian ringot or $6.8 million in assets under management it's significantly lower than the minimum required in Singapore which is around $15 million Asia Pacific as a region as well is one of
the high growth areas in in in in the world so that there's a lot of wealth movements and uh I don't think it's unreasonable for Malaysia to you know participate in you know trying to attract a part of that wealth transfer you know um into it shes the rising wealth of the Asian especially the valim family is is actually at very high rate like 20% per year right so this kind of growth the the the the growth actually has encouraged a setup of family office to attract the super rich Malaysia has offered a 0% tax
rate for family offices located in Forest cities sfz the Malaysian corporate tax rate is 24% right so 24% 0% I think it's a no-brainer you know for people to to look at the single family office setup in uh forest forest City in October last year prime minister anoai Ibrahim reaffirmed these additional incentives and there is another development that could favor Forest City the new Joo Singapore special economic zone will it be the Boost needed to reverse Forest City's fortunes or will the mega development remain Malaysia's white [Music] [Music] elephant Malaysia's Southern State of jeor has
long harbored the aspiration of becoming the shinen of Southeast Asia often referred to as China's Silicon Valley shunsen is home to numerous Tech Giants such as Hua way and tensent it also serves as a hub for research and development in areas such as Electronics Robotics and AI one key to its success is its strategic location bordering the financial center that is Hong Kong the special economic zone uh give them a lot of flexibility uh in designing a more Market oriented uh policies so they're always at the front of economic reforms in China and also uh
Shenzhen is actually a city consisting of migrants so they're very open up to migrants and they have a lot of you know Talent acquisition policies uh which attract you know uh High human capital individuals to locate uh to move to shenen like shinen jeor also borders a financial Hub Singapore and further integration was realized on January the 7th this year during the 11th Malaysia Singapore leaders Retreat Malaysia and Singapore signed an agreement to establish the Joo Singapore special economic zone otherwise known as jsz the special economic zone spans isanda Malaysia and Pang in Johor extending
across six districts Joor Karu isanda putri pasir gang ponan kulai and Kota tingi jsz aims to improve crossborder trade and business ties between these two countries at 3,500 square km the area is nearly twice the size of shinsen and four times the size of Singapore Joor has land Joor has abundance of Labor uh many of the laborers or workers are now working in Singapore but they can always play a role if there's a if there are seamless movement of people and goods uh in a new setting of scz some of the industries which wants to
spread cost as well as bringing some jobs to Joor they will find it conducive and both Joor and Singapore will also benefit from new investment that are relocating from elsewhere into this combined region forest city is expected to fall within this grand plan a proposal was made in August last year by the jeor state government to integrate Forest City sfz into the jeor Singapore special economic zone if Joo Singapore economic zone succeeds there will be more people potentially uh moving uh into South joho working even living here uh living in sou joho so for City
being a rade Township could attract some of these people to live there what Singapore has is a advanced Logistics Financial uh International Trade Hub kind of status and uh we do realize that um in joho we what we can offer is talent pool uh infrastructure land resources and Etc therefore we think that with forcity be included Within part of the Joo Singapore special economic zone for City itself may be able to complement part of the existing ecosystem within Singapore but with Forest City things are not so straightforward the project is still largely marketed at speculative
buyers from China for instance according to the finance ministry of the property sold 70% are purchased by Chinese investors however since the troubles in China's own property sector the appetite among Chinese Real Estate Investors has waned now we actually see some slow recovery of uh overseas investment in real estate so for example in 2024 the total outbound investment in real estate is about 10 billion 10 billion us but it's still you know less than half of the investment amount in 2016 to 2017 I'm not really sure whether you know they were able to recover back
to you know the level in 2016 and 2017 probably not there's still confident in China so I believe China will come back and China popul so huge and internal demand itself can make them vibrant can make them come back and so long as what they need to do is actually stabilize the whole situation and things will come back it is just a matter of time at the same time the mega city is less than 20% complete its beleaguered developer Country Garden is still mired in debt with approximately 194 billion in total liabilities and a loss
of more than 2/3 of value last year it's unclear if it can finish what it started Country Garden declined insight's request for comment based on what is available in the public it seems that um the country garden might be uh it might be challenging for them to continue the development in the for City because they even have trouble in you know finishing some of the projects with IM and China broadly uh most of the deer they are now looking for recovering stage right credit is an issue but now government is actually relaxing the credit and
then make it more uh for example the the the borrowings actually more more uh uh uh can be done today compared two years ago is so much better and the policy now is relaxing so things will recover slowly Country Garden is currently in talks with creditors to restructure some 16 billion in offshore debt all to avoid liquidation last November the developer said its Malaysian projects including Forest City are operating normally but should Country Garden go bankrupt who will complete the uncompleted Forest City project the government uh is not directly involved in the project itself uh
in the so we don't have any Equity participation uh in the Forest City project therefore we are not in that position at the moment there should be no government bailout um of the project because it's on such a huge scale yeah I mean the government of course must support but the best way for the government to support the is to provide a deregulated liberal environment where people can get access to the license to operate and then they can make the choices I think nobody in Malaysia would be happy to see government money taken from health
education and social protection in order to bail out um a failed Chinese uh property development the burden could fall on Forest City's co-developer Esplanade Danga 88 ceran burad the company is an affiliate of the state government with the Sultan of Jor owning a 64.4% stake Esplanade Danga 88 has a 40% share of Forest City well I believe the local partner is langa 8ad who have to find other developers or joint venture Partners to come in to develop the main developer espa Danga 88 can become the master developer bringing in people to compliment for the remaining
Island Island 2 three and four but new developers may not wish to undertake the original ambitious plan I think whether the project should be expanded or not it will have to uh depend on the demand so it's best is if the market decides uh whether the area should be expanded or should or it should remain as it is without the Chinese where this demand will come from is unclear though prices of homes in Forest City have come down since launch they remain relatively High the cheapest apartments here have a price per square foot above 550
Malaysian ringard in joob baru the median price per square foot is around 350 Malaysian ring the prices are affordable for foreigners but the foreigners because of regulations can't buy but the prices are too high for locals so because of the price the locals can't buy and what that means is you have huge supply and no demand now normally the prices would come down right in the market the prices would come down but when you're so highly leveraged and have spent so much money you can't really easily bring down the price of the units because then
you're to lose not just on um individual units but across tens of thousands hundreds of thousands of units here the revision to the Malaysia my second home program could expand the foreign buer pool beyond the Chinese mm2h as it's known is a golden Visa program to facilitate long-term residents in Malaysia under the previous government principal applicants had to park around 1 million Malaysian rinkit or 222,000 us and a fixed deposit to attain a 5-year multiple entry Visa the current Administration has reduced this to 675,000 Malaysian ringot or $150,000 us we hope that uh with the
current policy mm2 will be able to help with foreign investors willing to consider to leave in for City and in the same time that we are trying to attract more locals to move to for City at the moment uh we do receive some inquiries and uh it seems to be generating positive feedbacks at the moment and banks are looking to set up their their office uh within Forest cities Forest City was invisioned as a futuristic Metropolis with soaring skyscrapers and breath taking architecture it could still be realized if the Rejuvenation of Malaysia's ghost town is
successful for now its Stillness is a poignant reminder of what could have been we didn't expect uh covid to hit us that hard uh we didn't expect a lot of changes uh but what we can do is uh we'll be very cautious uh going forward visis foreign L Mega investment on paper it is a very promising project decent Township situated close to Singapore but still part of Malaysia so it has a lot of potential so I think at this stage we can describe that project as you know yet to realize its full potential for those
who are currently living here they're happy to call for a city their [Music] home for [Music] [Music]
