Country Garden Holdings, whose Forest City project in Malaysia is the biggest overseas project by a Chinese property developer, said it will refund money to mainland investors caught up in Beijing’s escalating crackdown on capital outflows.
The move is the latest consequence arising from Beijing’s tighter policy on capital controls, with most Chinese developers engaged in selling overseas properties now forced to shift their focus from mainland buyers to other countries.
“We have completely stopped our sales in (mainland) China,” Zhu Jianmin, vice-president of Country Garden, told the South China Morning Post last month in Hong Kong, referring to its flagship Malaysian housing project in Johor, which launched sales in 2015.
In March, the property giant closed all its Forest City sales centres on the mainland, a move first reported by the Post, after stricter government scrutiny on capital leaving China.
For buyers who made down payments on properties at Forest City, but are no longer able to transfer the rest of the payment out of China, “they can cancel the transaction and there is no need to pay a forfeit fee”, Zhu said.
Zhu emphasised that the project always abided by the rules and regulations of both Malaysia and China, and that only about 5 per cent of buyers were considering withdrawing their purchase.
Forest City, which covers 14 square kilometres of land on four artificial islands near the border of Singapore and Malaysia, has to date sold nearly 17,000 units for contracted sales of about 20 billion yuan (US$2.9 billion), mostly from mainland buyers.
Since the second half of last year, Beijing has continued to roll out tightening policies to stem the flow of money leaving its borders to prevent a large drop in its stockpile of foreign reserves triggered by the yuan’s devaluation.
This year, it implemented new barriers to stop individuals converting yuan into other currencies for overseas property purchases – a practice Beijing had turned a blind eye to in the past – dealing a big blow to developers like Country Garden and mainlanders who dreamed of a home overseas.
Country Garden chairman Yeung Kwok-keung, speaking in Hong Kong last month about the closure of its Forest City sales in China, said developers must follow the rules, otherwise the government would “give you a spanking”.
“It’s very difficult for individuals to get money outside now,” said Ben Briggs, executive vice-president of Briggs Freeman Sotheby’s International Realty based in Xiamen, China.
Briggs said Chinese demand for overseas property was still strong, given rising concerns over pollution, the yuan’s depreciation and sky-high home prices on the mainland.
Capital outflows from China surged to a record US$725 billion last year, compared with US$676 billion in 2015, according to the Institute of International Finance. Much of that money found its way into the overseas property market.
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