Country Garden: Closure of Forest City sales galleries in China not because of capital outflow controls

PETALING JAYA (March 10): Hong Kong-listed Country Garden Holdings Co Ltd has denied that the closure of Forest City’s sales galleries in China was due to the government’s capital control policy.

In a statement today in response to a report by South China Morning Post on the closure of the sales galleries in China, Country Garden Pacificview Sdn Bhd chief of strategy Yu Runze said the closure is temporary and in line with a shift in the company’s sales and marketing efforts which began early this year.

Country Garden Pacificview is the master developer of Forest City, a RM444 billion mega development in Johor. The project, which spans 14 sq km of land on four artificial islands, is a joint-venture development between Country Garden Holdings and Esplanade Danga 88 Sdn Bhd, a Johor state-owned associate of Kumpulan Prasarana Rakyat Johor. Most of its residential units sold so far have been to China buyers.

“It is not a knee-jerk reaction to the Chinese government’s policy implementation. With the continued opening up of the Chinese economy and the globalisation of Chinese companies, there is an increased demand for cross-border trade settlement in China’s yuan currency. We believe the Chinese government will approach this matter [capital controls] in a fair and pragmatic manner that will benefit all,” said Yu.

He added that the company initially targeted buyers from mainland China because of Country Garden’s strong reputation in China but the company has “always planned to sell beyond China”.

“We have chosen to bring those plans [to sell beyond China] forward this year. Country Garden will be taking a holistic approach to our sales and marketing initiatives, and looks to present an overview of our projects in China and beyond,” he said. This includes its mixed-used development in Hainan and Forest City.

“This will also allow us to sell to foreigners. As such, we had to close our centres to refurbish our sales galleries, upgrade our marketing materials and retrain our sales professionals,” he explained.

Yu envisaged the Forest City project to be one that will attract buyers from around the world, and hence the company is promoting Forest City to prospective buyers from Southeast Asia, Japan, South Korea, India, the Middle East, Europe, and the US.

Meanwhile, in a reaction to the news on the closure of the sales galleries, real estate agents who spoke to TheEdgeproperty.com said there will be fewer Chinese buyers for the Forest City development going forward.

Tiram Realty principal Lim Ah Leck, who is currently helping Country Garden market Forest City and Country Garden Danga Bay, said the project may be affected as about 95% of Forest City’s buyers are from China.

“The construction progress and sales of the unsold units in Forest City are expected to slow down while the units that were sold prior to this may not be affected,” he said.

Lim added that other Chinese developers in Johor, such as R&F Properties Co Ltd and Shanghai state government linked-Greenland Group, and Malaysian developers will be less affected as they rely less on Chinese buyers compared with Forest City.

Johor-based property consultant KGV International Property Consultants executive director Samuel Tan said to attract buyers of other nationalities to Forest City will entail a different marketing strategy and pricing would be part of it.

He added that if China buyers are still able to remit their money to buy properties in Forest City, the impact should be mitigated. 

"Apparently, since the second half of last year, the developer has encouraged many of its China buyers to remit their money from outside China, particularly from Hong Kong," he said.

However, he warned that if Beijing's capital control policy is implemented strictly, it will affect all Chinese development projects that involve private entities in Malaysia. On the other hand, he said, ventures with the government or government-linked companies will not likely be affected as China is intensely promoting the "One-Belt-One-Road" policy which will require capital outflow.

Hartamas Realty (OUG) real estate agent Ren Zian Tey, who provides real estate services to Chinese property buyers, believes the impact of the capital flow controls on Chinese buyers would be temporary as developers will adjust their strategies to deal with the issue.