head over to the official Forest City website and you'll see something spectacular an enormous ultramodern Mega City that resembles a glimpse into some utopian science fiction future exciting buzzwords like green and smart and dynamic harmonious a company dazzling photos of towering apartment blocks nestled amongst luscious pockets of greenery the city itself positioned on a man-made island is surrounded on all sides by inviting white beaches that roll out to meet seemingly infinite Crystal Clear Blue oceans truly who wouldn't want to live in this Tropical Paradise but we'll look a little closer and you'll notice something that
turns this paradise into an existential nightmare there are almost no people the roads while immaculately maintained are completely empty the beaches luxurious swimming pools water parks and even the tennis courts likewise lack even the slightest sign of Life a BBC Journal has visited Forest City in 2023 and not too surprisingly the handful of people that do live there are desperate to escape describing the city as a lifeless husk that quickly erodes the sanity of anyone trying to live in what is essentially a ghost town encapsulating just how unsettling for a city can be the BBC
representative reported seeing a children's train doing endless laps around a deserted shopping mall the entertainment gimmick not shut off despite there not being a single child or person in sight so what happens here how did a 100 billion doll real estate project get funded and partially built only to now sit with less than 1% of its resident is occupied well as always seems to be the case with highly ambitious enormously expensive Mega projects that ultimately fail the story of Forest City is riddled with controversy corruption and a lot of very ill-conceived ideas imposed by a
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you're ready to jump in use the code Mega projects at incog do.com meegar projects for a whopping 60% off the annual plan your future self will thank you and thank you to incognit for sponsoring today's video now back to it understanding the full scope of how Forest City landed up abandoned is a broad complicated topic but we'll do our best to summarize the key points for you there are two stories that we need to follow that of the Chinese real estate bubble and that of private real estate investment firm country garden holding let's start with
the Forma China experienced a real estate boom kicking off around 2003 it was at that time that the Chinese government changed its attitude towards ownership of real estate having previously subscribed to the idea that real estate should be collectively owned in the early 2000s the government warmed up to the idea that private real estate ownership could be rather good for the economy accompanying the shift in policy was Premier WJ ba who in an effort to kick off the new market encouraged Chinese Banks to offer cheap credit to those looking to invest in or buy property
an additional factor to keep in mind is how saving money Works in China if you have savings as a Chinese resident simply putting the money in the bank isn't really an option while money in Chinese Banks does earn interest that interest just doesn't keep Pace with inflation so ultimately money left in the bank gradually loses value rather than gaining it heavily incentivizing Chinese residents to invest their savings but invest in what well real estate is an excellent opportunity and with the market suddenly booming everyone with a bit of cash was eager to jump in and
get involved so China went from having almost no real estate market to suddenly having countless middle class and upper middle class Chinese residents collectively pouring in millions the sudden economic shift as you would expect resulted in real estate prices gradually starting to climb exacerbating the situation was Regional Chinese governments almost all of which also decided to get in on the exploding New Market eager for a bit of quick revenue and more or less being given the green light the regional governments of almost every Province started to gather up investment Capital develop lands with housing or
retail outlets and then sell or rent the property out as quickly as possible at this point however everything was going exactly according to plan the booming real estate market was indeed invigorating the Chinese economy and the government was getting its slice of the pie but lest there be any doubt thrusting a lucrative New Market into an already established economy is going to have consequences an economic bubble began to form real estate prices began to saw and investors responded with a knee-jerk reaction everyone that could started to frantically buy up as much property as they possibly
could with some reports saying that certain investors stapped up dozens or even hundreds of properties but importantly the buy up wasn't happening because the investors intended on developing the property they were simply speculating that prices would continue to climb and then they'd walk away multi-millionaires now the Chinese government obviously hadn't intended on creating a spiraling speculators Market but that is exactly what they got the bubble continued to grow and before long average property values had tripled while Prime real estate in bigger cities had gained up to 10 times its original value as a byproduct those
middleclass Chinese citizens looking to invest suddenly couldn't even afford local real EST estate once again leaving them with savings and nowhere to invest it that's where Country Garden holding came in Forest City was first proposed as a 20-year investment project in 2006 right about the same time when ja B was encouraging local real estate investment the core concept of Forest City was a luxury Island established off the coast of Malaysia specifically in the jeor baru district the island was to be self-contained would offer ample Living Spaces and would have its own schools its own shopping
malls and would even provide a host of luxury amenities now if you're thinking that there wasn't an island off the coast of Malaysia well not to worry the island was to be reclaimed from the sea otherwise known as artificially created that the decided on construction zone was designated a wetland of international importance and the ramsar convention was more or less just ignored including a strict declaration that no development should occur in the area unless that development was nature tourism or for research and education as a consolation the single large island was ultimately reduced to a
series of four smaller Islands though the first of the four that now exists Three Square kmers in size still violates countless conservation guidelines okay so now let's turn our attention to the company responsible and the biggest player in today's story Country Garden holding Country Garden saw what was happening in the Chinese real estate markets and well credits where it's due came up with a rather genius idea the Chinese middle class were priced out of the local market so surely they' embrac the idea of investing offshore namely in Malaysia Forest City was therefore by design a
means for Chinese residents to maintain their savings with an investment in affordable luxury real estate initial investment in Forest City was strong and Country Garden holding went ahead pouring an initial few million into establishing the first artificial Island the kickoff phase of Forest City followed going swiftly into construction and seeing its grand opening in 2016 only about 14% of the intended City was completed but even this taste test included multiple towering apartment blocks collectively capable of housing around 700,000 people the other three islands would follow after the first sold out Country Garden insisted indicating that
the company clearly expected units to sell like hotcakes and why wouldn't they the grand opening was attended by the Malaysian prime minister NJB razak who in an effort to boost interest declared Forest City a duty-free Zone a popular Sultan Ibraham ismal of jeor likewise gave His official approval all but setting the stage for what would be a buying frenzy keep in mind that Country Garden in conjunction with Malaysian state government subsidiary culan prasarana rakat Jor had collectively invested around a hundred billion doar it was at this time however that things started to go oh so
wrong A Series of Unfortunate Events kicked off and wouldn't stop until Forest City was transformed into the ghost town that we know today [Music] all right let's roll the clock back to 2008 the real estate bubble was expanding out of control businesses and private residents were eagerly snapping up real estate and Regional Chinese governments were leaning heavily into quick turnaround investment opportunities well that's when the global financial crisis hit the world tightened its Collective belt and China suddenly found itself with significantly less demand for its exports this of course was a serious problem and if
steps weren't taken to course correct the entire country would head into recession so seeing where the economy was showing the signs of strongest growth the government released a stimulus package of $568 billion almost all of it directly into infrastructure development and real estate the good news is that the stimulus package worked and the Chinese economy stormed through the financial crisis virtually unscathed the bad news is and you can surely see where this is going that the stimulus package also ballooned the real estate bubble into a swollen nightmare provincial governments having already leaned into real estate
development projects now turned the dial up to overdrive half a trillion dollars was up for grabs and governments wanted as much of it as they could get their hands on pouring more and more into development projects that were quickly getting less and less affordable more to the point even poorly thought out inefficient and downright ill-conceived projects were be in greenlet many of which failed outright and weren't producing any return on investment so while it seemed like China was enjoying a wave of exciting economic development in reality the real estate market was getting oversaturated and overpriced
while provincial governments were amassing billions in debt by 2011 the Chinese government saw what was happening and frantically slammed on the brakes deciding to implement deflation measures before the market collapsed new policies now aimed at curbing real estate investment were hastily rushed into practice the key policies included a 40% down payment requirement as well as restrictions preventing buyers in major cities from owning more than two properties topping it all off was a new property sales tax the most sure far way to damp bur any booming Market as was the intention real estate prices began to
drop finally bringing the situation under control or at least the market was now under control as far as the government was concerned for those speculative buyers that have been throwing Millions into the thriving Market what they heard was the abrupt clanging of alarm Bells speculative investors were now at risk of losing everything and they responded in the only way they could they panicked so following years of rampant investment into real estate the market turned suddenly into a frantic sell-off the sell-off got so chaotic that some even started selling valuable property at a fraction of what
it had originally been bought for swiftly leading the market into potential disaster the government took action again this time introducing a policy that forbade property being sold if the price was lower than 20% of the established market value with that chaos playing out let's turn our attention back to Forest City the real estate market developments in China weren't necessarily a problem for the offshore investment strategy local property prices were still up even if they had been somewhat Tamed and middle-class citizens were still struggling to find investment opportunities so naturally initial Forest City sales were strong
and the project was set to be a success but here comes the first spanner in the works the government was well aware of the debt the provincial governments have been racking up and was likewise getting concerned about the rising inflation indirectly caused by the $500 billion stimulus package so the last thing the government wanted was enormous sums of cash flowing out of China rather than into the local economy hence leader Xi Jinping again attempting to control a situation his government had created decided to impose an annual foreign spending limit of $50,000 for all Chinese citizens
while implementing the new policy Xi Jinping made the statement that has acted as a guiding principle for the Chinese real estate market houses are for living in not for speculation thus the first nail was hammered into Forest City's [Music] coffin sales began to slow dramatic ially But Country Garden holding clung to their multi-billion dollar investment hoping the tides would again turn in their favor the tides did indeed change but not in a favorable Direction Malaysia ran into its own political crisis starting around 2018 now we're not going to go into details here but integral to
this story is the prime minister najab razak who had enthusiastically supported Forest City was unexpectedly replaced by Mah Muhammad who was openly opposed to an influx of new Chinese residents investors already cautious about putting their money into a politically unstable region were sent running for the hills as mahath Muhammad called for a city a negligent waste of money and declared that he intended on Banning foreigners from purchasing the dwellings this wasn't a ban he was able to follow up on given the legal ramifications but sales for Forest City now more or less ground to a
complete halt any remaining Embers of Hope were quickly snuffed out by the co pandemic which swept the world as it stands it's rather difficult to get a real estimate of how many units were sold or how many residents stay in the hand of occupied Apartments as far as sold units are concerned an estimate says around 15,000 of the apartments were purchased in 2019 estimates of residents living in the apartments vary drastically from just 500 to around 9,000 though these numbers often include the small army of workers responsible for keeping the city maintained whatever the real
numbers it's pretty safe to say that Forest City has failed spectacularly though for a bit of additional perspective Forest City really is just the tip of the iceberg when it comes to the frankly Gob smacking aftermath of the Chinese real estate bubble the world is all but lited with fully abandoned or partially abandoned development projects that are either far too expensive to rent out or were never sold at all or were never needed in the first place some of the most infamous examples include the Kang Bashi new area in inam Mongolia where living space for
300,000 currently only has 30,000 residents the new South China Mall the biggest mall in the world offers 2,300 retail spaces of which only 4 47 are occupied in the city of Tian Jin office bace was erected so quickly and so haphazardly that a recent estimate suggested the buildings won't actually be needed for another 25 years as far as Forest City is concerned there are signs that the project May regain some sort of Life perhaps most telling is the country garden holding has continued to keep Forest City structures wellmaintained and seems adamant to keep doing so
this despite talks that the project would be sold or seized as part of a debt restructuring effort the latest Malaysian prime minister anoir Ibrahim meanwhile also seems to have warmed up to the project even making an effort to reignite foreign interest in August 2023 Forest City was declared a special Financial Zone with incentives aimed at attracting skilled overseas workers there's no official word on how well the incentives are working though Country Garden Brands manager shiu claimed in December 2023 that Forest City now had close to 10,000 residents that number is a bit questionable but based
on more unbiased reports it does seem that most visiting the area go primarily to enjoy duty-free alcohol almost all visitors still leave before Sundown though mostly because the dark empty streets are reportedly really really creepy
