$100 Billion Dream Development In Malaysia Could Become a Ghost Town Folly
Four man-made islands, 700,000 residents, and a quarter of a million housing units—the most expensive development flop ever?
If you’re tired of congestion, pollution and noise, a $100-billion-development comprising four man-made islands in Malaysia may be just the place you need to relocate to. The only problem is, once you step out of your luxury apartment, you might find yourself the only person on the streets.
The developments called Forest City, expected to be completed by 2040 will comprise new high-rise apartment complexes, office buildings, parks, shopping malls, bus stops, hotels, restaurants, shops, schools, and sidewalks. The 5.4-square-mile city — about four times the size of Central Park — will be able to accommodate 700,000 people. The only problem is very of that number may actually be living there.
Since the Chinese Government enforced tough restrictions on money leaving the country in late March or use their credit cards abroad efforts to curb money from leaving the country, the ability for Chinese nationals to invest in Forest City has hit the development hard. The Financial Times reports that nearly 60 home buyers — 70 percent of which are Chinese — have canceled their leases.
“I‘ve lost confidence in this project and I don’t want to pay any more,” said Ms. Zhu, an investor who has already paid nearly $44,000 of the $334,000 purchase price. “I told my salesman that I want a refund, but he just avoids me.”
Ms. Zhu could just be the start. The Chinese invested $33 billion in overseas commercial and residential property deals last year, according to Jones Lang LaSalle, a real estate services firm. Freezing their money from international markets could have a dramatic effect. Even though the buyers for Forest City are mainly Chinese as are the developers, Country Garden, payments must be made in Malaysia which creates an issue.
While representatives for the project told Business Insider on April 7th that they are trying to work out agreements with buyers who may be forced to break their lease, it doesn’t solve the essential problem. How will they get Forest City sold? It’s not like this hasn’t happened before. Since the 1970s, Chinese developers have built some-500 ghost cities in China.
Once intended to accommodate over one million residents, the new town of Kangbashi in northern China is today home to just one-tenth of its projected population. In the early 2000s, Chinese government officials poured over $1 billion into the development of the city, several miles south of Ordos in Inner Mongolia. The combination of foreign architects and Chinese government’s development lust has created many visually stunning projects that remain as empty as a beach town in winter.
Still development in Forest City continues unabated, with the hope that international investors will populate it if Chinese cannot.
“This is a very dense development. The density will be greater than Manhattan,” Michael Grove., one of the development’s master-planners from New York-based design firm Sasaki, told Business Insider, optimistically. “This is a private developer. This isn’t the government throwing money at a project wastefully,” he said. “This is a developer who’s very careful about their bottom line. They have investors that they need to be responsible to and show that it’s profitable and becoming a successful place.” Only time will tell if he’s right.
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