(Updates with Country Garden comments, profits paragraphs 11-13
By Clare Jim
HONG KONG, March 12 Malaysia is turning into the
darling of Chinese developers as mainland investors turn their
backs on market restrictions in Hong Kong and Singapore and bet
billions on cheaper housing and higher returns in the Southeast
State-backed Greenland Group announced this month a $3.3
billion deal in two residential and hotel projects in Malaysia,
joining smaller peers Country Garden Holdings Co Ltd,
Guangzhou R&F Properties Co Ltd and Agile Property
Holdings Ltd, which have invested a combined $2.7
billion in Malaysia in the past two years.
In 2013, Chinese institutional and retail investors invested
a total of $1.9 billion into real estate in Malaysia, exceeding
the $867 million invested in Hong Kong and $1.8 billion invested
in Singapore, according to real estate consultancy Savills. The
figure also topped the $1 billion invested in Australia, but
lagged Chinese investments into Britain and the United States.
"Malaysia hosts a vast Chinese community and has policies
that attract foreign buyers so it has become a new investment
destination," said Greenland's group chairman, Zhang Yuliang.
He added that Malaysia's stable economic growth, large
population demand in Johor Bahru, the city where the group is
investing, its proximity to Malaysia's major cities and
Singapore, as well as the country's established immigration
policies, are reasons for the company to invest.
Greenland is due to report 2013 earnings on Wednesday.
Officials with Agile and R&F could not be reached for comment.
"Malaysia is the cheapest in the region in terms of capital
city pricing," said Tim Murphy, chief executive of property
investment consultant and underwriter IP Global. "We like
Malaysia also because of the strong foreign ownership level and
because you can borrow money. Lenders are friendly."
A 15 percent stamp duty on non-resident buyers in Hong Kong
and Singapore, where cash-rich mainland Chinese have been blamed
for driving up prices in the past few years, has deterred many
foreign buyers, Murphy added.
Luxury residences in Malaysia sell for between $2,300 and
$5,600 per square metre, much lower than $27,600 to $33,700 in
Singapore and $43,700 to $53,500 in Hong Kong, according to real
estate consultancy Knight Frank. Average rental yields are also
more attractive in Malaysia at 4 to 6 percent, compared to 3
percent in Singapore and 2.5 percent in Hong Kong.
Mortgage terms are also better for non-residents in
Malaysia, with buyers able to borrow 70 percent of a property's
value. That's more generous than the 40 percent to 60 percent in
Singapore and 30 percent to 50 percent in Hong Kong.
Country Garden President Mo Bin said Malaysia was a more
attractive market for the company than China.
"Malaysia is a nice market, it has some edge over China," he
told an earnings briefing after the company posted on Wednesday
a 24 percent increase in its 2013 net profit.
"We don't rule out acquiring more land there."
One challenge facing Chinese developers is their ability to
secure land, which is tightly controlled by local governments.
"It's difficult to find good opportunities because the good
plots of land are controlled by the local government. Only local
developers, family of government officials and political
affiliates can have access," said an executive at a private
equity fund who invests in Southeast Asian projects.
Country Garden, which focuses on high-end residential
housing, has three villa projects underway in Malaysia after it
entered the market in early 2012. At its latest condominium
project at Iskandar, five minutes from the Singapore border, the
company posted contracted sales of 7 billion yuan ($1.14
billion) last year, topping the list of its projects.
Since the middle of last year, Country Garden has been
organising subsidized tours to Malaysia for potential Chinese
buyers, departing from Guangzhou, Hong Kong and Macau.
A four-day tour costs as little as 3,610 yuan, according to
information on real estate agent website, house.163.com, with
the property developer sponsoring 2,000 yuan for each person.
One morning is spent at Country Garden's Danga Bay villa in
The web page, topped with a banner that says "300,000 yuan
to get residency for the whole family in a city next to
Singapore", also gives details about Malaysia's immigration
($1 = 6.1402 Chinese Yuan)
(Editing by Matt Driskill and Miral Fahmy)