KUALA LUMPUR (Aug 28): Country Garden Holdings’ shares “see-sawed” yesterday after Malaysian Prime Minister Tun Dr Mahathir Mohamad announced that foreigners will not be allowed to buy property at the Forest City mega project in Johor.

According to a report by the South China Morning Post (SCMP) the stock, which had risen by as much as 3.9% earlier yesterday, returned almost all of its gains for the day on the Hong Kong exchange after Dr Mahathir’s announcement was published.

The stock ended the day 2.5% higher at HK$12.14.

Reuters reported Dr Mahathir yesterday as saying: "One thing is certain, that city that is going to be built cannot be sold to foreigners."   

"Our objection is because it was built for foreigners, not built for Malaysians. Most Malaysians are unable to buy those flats."

Bloomberg, however, reported that Dr Mahathir didn’t give details about how he would prohibit foreigners from buying such properties or how far-reaching the ban on visa approvals would be.

Country Garden Pacificview Sdn Bhd is the master developer of Forest City. It is a joint venture company between Hong Kong-listed Country Garden Group and Johor state government-owned Esplanade Danga 88 Sdn Bhd.

In response to Dr Mahathir’s comments, the developer reiterated that all its property transactions comply with all Malaysian laws and regulations and have the necessary approvals to be sold to foreign purchasers.

"Pursuant to Section 433B of the National Land Code, a foreign citizen or a foreign company may acquire land in Malaysia subject to the prior approval of the State Authority [having] been obtained.

"We do not issue any Permanent Residency (PR) to foreign buyers of Forest City,” it stressed in an official statement.

"We are currently in touch with the Prime Minister’s Office for clarifications, as we believe Tun Mahathir’s comments may have been taken out of context in certain media reports,” said the company.

Speaking to SCMP, Patricia Li of Yunnan province said that: “We think the new government is unfriendly to us Chinese buyers. Even those China-backed infrastructure projects have been cancelled, let alone our private investments.

“We all know the project has been popular among Chinese investors, all because it would make our dream of having a second home abroad come true via buying an apartment here.”

Li purchased a 516 sq ft unfinished flat in Forest City last year.

Raymond Cheng, head of Hong Kong and China research at CGS-CIMB Securities told the Hong Kong English daily “nearly 90% of the buyers are mainlanders who bought because the property comes with residency rights in Malaysia”.

“Local residents can barely afford buying there. If it shifts to Malaysians, the price may need to be cut…”