WILL CHINESE CAPITAL CONTROLS AFFECT MALAYSIAN PROPERTY?

Contrary to public perception, Malaysia may prove to be the biggest beneficiary of China’s capital controls.

Despite forebodings that the Chinese worldwide property shopping spree has come to an end following capital controls imposed by Beijing in late December, local expert, Dato’ Sri Gavin Tee believes the measures will benefit the markets in the long-term. In particular, he is of the opinion that Malaysia will be the main beneficiary due to its close connection and cultural similarities with China.

“The impact is certainly positive for Malaysia even in the short-term. I foresee more Chinese investments coming in due to several strong factors,” he said during a press conference at the signing of the Memorandum of Understanding between Swhengtee Property Expo and One Belt One Road Property & Finance Expo in Kuala Lumpur recently.

He added that Western nations, up till now, the favourite destinations for Chinese property buyers, may have to adjust to the new environment of fewer Chinese buyers but their property market won’t collapse. “Prices of property in hotspots like London and Vancouver might be affected but this is a healthy trend in the long term.”

Tee believes the inconvenience the Chinese buyers face in taking money out of China would not be a long-term problem and sooner or later, there will be some adjustments to accommodate this. Tee is positive the Chinese will continue to invest in overseas property and in the long-term may even make up the biggest share of the world’s property market. In the meantime however, the capital controls will definitely change the way the Chinese invest overseas.

He continued that many Chinese have travelled around the world and have finally come to the conclusion that Malaysia is still the best place for them as their ‘final destination’ for business, education, health and wellness, and retirement.

At the same time, they are encouraged by the fact that their government has warm ties with the Malaysian government, with many mega projects being jointly undertaken or are in the pipeline. “Our Malaysian government policies are friendly to them and that’s a very strong pull factor,” he stressed.

“Chinese investors in general are also suffering from ‘Western fatigue’ where many Western nations (as well as Hong Kong and Singapore) have imposed protectionist policies including high barriers to property investment in their countries, for example, the UK and Australia.

“This has prompted the Chinese to shift their attention to more welcoming regions like ASEAN. Within ASEAN, Malaysia stands out for being the most China-friendly in terms of our policies and our government-to-government co-operation.”

SMIS/SMES TO DRIVE GROWTH

He singled out Malaysian SMI and SME development which is currently at a matured stage – and which the Chinese entrepreneurs are hoping to leverage on – to drive the growth ahead.

“I expect the Chinese SMIs/SMEs to invest heavily in Malaysia. At the same time, our Malaysian SMIs are moving to China. Imagine the huge movement of trading/business and people between these 2 countries. Being the smaller country, the Malaysian economy will definitely benefit immensely.”

“So, contrary to the general perception, Malaysia will gain a lot of market share of Chinese investment worldwide.”

Tee, who is also the President of Swhengtee International Group, believes that after the mega-project era (which is still ongoing), the activities would shift back to small and medium enterprises, with technology being the driving factor. “The SMI/SMEs would dominate economic growth again similar to the 80s and 90s when SMIs/SMEs were the engine of growth in Malaysia.”

Along with this growth, there will be more functional type of investments like manufacturing rather than just pure investment. “In the next 3 – 5 years, I foresee the Chinese coming in greater numbers for business, tourism, education and retirement. The basic elements for coming here are all there – but this will not create a bubble. This is the healthy type of investment – such as entrepreneurship, which the Chinese government encourages as well.

Many Chinese Mainlanders have already secured their MM2H residency in Malaysia and are bringing their business enterprises and network to Malaysia as well as their families. This augurs well for the property market in Malaysia as they would need to acquire property for both their business and dwelling.

“At the same time, the cultural similarities with Malaysia draw them in compared with Western culture. In particular, those coming from China’s Tier 2 and 3 cities feel more at home in Malaysia than say, the US, Europe or Australia,” he added.

The facilities in Malaysia also meet their needs – manufacturing, health and wellness, education, tourism, infrastructure and IT – these 6 factors are the same factors sought by Chinese throughout the world. “And luckily for Malaysia, we provide all of them,” Tee noted.

China is now the top investor in Malaysia, according to a report from Cushman & Wakefield. The C&W report stated that Chinese companies, largely developers, invested an estimated USD1.86 billion in Malaysia between 2014 and 2016, replacing Singapore as top investor. During the same period, Singaporean firms invested USD1.14 billion in Malaysia.

RM100 MIL SALES FROM EXPO

For this reason, Swhengtee Property Expo has brought in officials from Chinese cities to introduce the advantages of their cities; accompanying them will be hundreds of investors from China. In addition, due to the long Hari Raya weekend, many outstation shoppers visiting Mid Valley City will take the opportunity to attend the expo.

Swhengtee Property Expo is expected to be a success in providing a great networking platform for both Malaysian and Chinese developers/real estate stakeholders as well as a one-stop venue for potential homebuyers and investors. It is estimated to generate sales of up to RM100 mil, according to a Swhengtee spokesperson.

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