A $100 billion city was built in Malaysia: why has no one settled there?

An impressive ghost town is located 10 kilometers from Singapore. It was designed for 700 thousand people, but only 9 thousand live in it. Why did this happen, and does the city still have a chance of salvation? onliner.

Photo: IStock

At night, in dozens of residential high-rises located on four artificial islands, only a few windows light up. The streets are deserted, in the huge shopping center, which should have been bustling with life, only a few shops are open, and even those are barely making ends meet.

Forest City was conceived as the largest development project - in fact, the construction of a new city designed for 700 thousand people.

The Country Garden company, one of the leaders in the Chinese real estate market, planned to invest $100 billion in the creation of a new settlement in Malaysia, but has so far managed to implement only 15% of the project. System errors and miscalculations have led to the fact that now only 9 thousand people live in Forest City and a significant part of them regret the choice they once made.

Ambitious plans

Forest City was to be the main project to transform the Iskandar region into a new growth point for Malaysia. The initiators of this process in the government of the country and the Sultanate of Johor, one of its southern states on the border with Singapore, intended to repeat the successful example of Chinese Shenzhen, which, thanks to its proximity to Hong Kong, very quickly managed to transform from a quiet fishing village into a modern metropolis with a population of 10 million.

On paper everything looked great.

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A special economic zone with a preferential tax regime was created, plans were announced for the creation of new industries, including high-tech ones, and the construction of the first residential areas began, designed for workers of these industries, as well as for former residents of Singapore, who could be attracted by the relatively cheap price compared to theirs. real estate prices. Indeed, the proximity of this wealthy city seemed a natural locomotive, practically guaranteeing the inevitable success of the entire enterprise. Forest City, created as an example of a “smart city” of the XNUMXst century, was presented as the anchor project of this entire ambitious idea.

General project

Construction of Forest City began in 2016, and, of course, such a large-scale construction project, in which it was planned to invest $100 billion, could not help but attract the attention of Malaysia’s top officials. The idea received the approval of both the country's Prime Minister Najib Razak and the Sultan of Johor Ibrahim Ismail.

The city's master plan was developed by the American architectural bureau Sasaki Architects.

According to the proposed idea, four new islands with a total area of ​​1370 hectares were built right in the Strait of Johor, separating Singapore from Malaysia. This artificial land received complex development: most of it was to be occupied by residential buildings of various formats, but it was also planned to erect administrative high-rise buildings, construct shopping and entertainment centers, and create a large park. Close attention to ecology was generally declared as the main idea of ​​the new city. It was assumed that the main communications, primarily automobile ones, would be removed underground, and the surface would be given over to pedestrians and cyclists. Most of the buildings were to receive the abundant vertical landscaping that is now so popular in Singapore. This led to the name of the project - Forest City, “Forest City”.

With China in mind

A separate joint venture company was created to develop Forest City. Forty percent of its shares belong to Kumpulan Prasarana Rakyat Johor, the state-owned investment holding company of Johor, but the main partner who received the remaining sixty percent was Country Garden, one of the largest developers in China with extensive experience in the Chinese market, but already had the first implemented facilities in Malaysia.

In fact, the new project was mainly aimed at Chinese buyers, to the point that even the inscriptions on street signs were duplicated in hieroglyphs.

It was assumed that investors from China, attracted by the proximity of Singapore (as well as the opportunity to own an apartment near the water), would become the main population of the new city. Moreover, in Malaysia, since 2002, the state program “Malaysia is my second home” has been in effect, thanks to which people could receive a long-term visa in exchange for opening a bank account in the country with a certain deposit, which could subsequently be partially used to purchase an apartment or house. That is, a potential Forest City resident could use the property overlooking Singapore as a primary residence or as an additional home, such as a holiday home.

First sales

The first homes in Forest City began shipping in 2019, and Country Garden was initially pleased with sales. Approximately 70% of all buyers were Chinese citizens, although the developer claims that among the investors there are citizens of more than 30 countries.

A three-room apartment could be bought for $180 thousand.

For residents of Malaysia, this is quite a lot of money, but a successful Chinese could easily afford such expenses. This once again demonstrates who the target audience of the megaproject was. Moreover, even this amount could not be compared with the cost of housing in neighboring Singapore. Apartments of comparable consumer qualities and area, if you do not take into account social housing subsidized by the state, are valued there at five times more expensive.

Problems begin

However, it soon became clear that Forest City was facing problems that could doom the entire project. Firstly, soon after construction began, the Chinese authorities tightened the export of capital from the country. Now every Chinese citizen could spend only $50 thousand a year outside of China. This alone has scared off many potential buyers, and caused those who had already entered into a contract to purchase unbuilt housing to change their minds, often with penalties amounting to 20-30 percent of the property's value.

The second factor was the coronavirus pandemic, which significantly limited travel opportunities.

Forest City was designed primarily for foreigners; for Malaysians, we repeat, the apartments there were a bit expensive. However, due to the bans on border crossings, travel to a potential “second home” has become difficult. Finally, thirdly, the new Malaysian government, which replaced the Najib Razak cabinet in 2018, tightened the issuance of long-term visas to Chinese citizens, who were the main clients of the developer.

Bubble Victim

But still, the main circumstance that determined the transformation of Forest City into a ghost town was the serious financial problems of the developer. The developer Country Garden seemed unsinkable and pursued an extremely ambitious, but at the same time risky construction policy, getting involved in several large-scale expensive projects at once, without having enough of its own funds for this.

However, the company was not the only example of such adventurism.

For example, Evergrande Group, the second largest Chinese developer, found itself in a similar situation.

China's real estate market became overheated and a bubble inflated, with apartments not being built for real life but viewed only as an investment instrument. As a result, in 2021, Chinese President Xi Jinping announced the beginning of a market restructuring under the slogan “Houses are for living, not for speculation.” Some developers lost access to the cheap loans that fueled their explosive expansion, ultimately leading to bankruptcy.

Collapse

In 2021, Yang Huiyan, owner of Country Garden with a net worth of $29,6 billion, was named the richest woman in Asia. Just two years later, Yang had lost most of this money, and Forbes magazine now estimates her net worth at “only” $3,8 billion. Most likely, this is not the limit, and the woman will continue to become poor, because her main asset has enormous problems.

In 2023, it turned out that Country Garden's debt load was about $200 billion.

In October, the developer was unable to service its obligations for the first time and was eventually forced to sell its Australian projects. The company's shares have lost two-thirds of their value, and the only hope for the company's survival is possible assistance from the state. Under such conditions, of course, the chances of completing Forest City, at least in its original form, are slim. It's like a vicious circle. To continue the construction of Country Garden, it is necessary to sell apartments, but buyers refuse to pay money, already realizing that the new city turned out to be problematic and not at all what the developer promised to make it.

City of Solitude

To date, Country Garden has managed to build about 15% of its plans. This is approximately 28 thousand apartments in many high-rise buildings, which, by the way, actually received the promised vertical landscaping, albeit a very modest one. However, the current population is only 9 thousand people, meaning most of the apartments are essentially empty. Moreover, about 80% of all current inhabitants of the ghost town are not owners, but renters. They mainly operate either in Singapore or the nearby Malaysian container port, using Forest City only as a location for cheap housing.

Most of those who managed to buy an apartment in the city were severely disappointed with this investment.

The property has lost value, and now the sale, even if a buyer is found, will bring a loss. You can rent a three-room apartment for only $180-200, which is ridiculous even by our standards, not to mention the ultra-expensive Singapore. But even such prices have difficulty attracting new residents.

Future

The developer continues to assure that all his plans remain valid and will be implemented sooner or later. Perhaps the Malaysian state will help him. In August of this year, the country's Prime Minister announced the creation of a special duty-free zone in Forest City, as well as plans for new liberalization in issuing multiple-entry visas and reducing income taxes for city residents.

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The near future will show whether these measures will be enough to populate the city, but so far the sales statistics only cause a condescending smile.

Even many current residents are planning to move, because the city is empty, and the necessary infrastructure is not fully operational. Nowadays, most passers-by turn out to be visitors, interested only in buying cheap alcohol, which further reduces the attractiveness of local real estate. And even on the beaches that were supposed to attract Chinese tourists, there are signs prohibiting swimming due to the threat of crocodiles! But that is not all.

An additional problem may be design errors in construction: cracks have appeared on some Forest City buildings. According to some experts, the developer was in too much of a hurry to start the mega-construction and did not give enough time for the soil of the artificial islands to settle. The fallout continues to this day, becoming another threat to the bright future of the “Forest City”.

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