SYDNEY • Hanging a "foreigners not welcome" sign on a giant real estate development in Johor, Malaysia's Prime Minister this week appeared to add to housing curbs around the world fuelled by soaring home prices and populist politics.
Describing the Chinese-backed US$100 billion (S$137 billion) Forest City development as "built for foreigners" and beyond the reach of ordinary Malaysians, Prime Minister Mahathir Mohamad tapped the nationalist rhetoric that helped secure him an upset election victory, as well as global angst over housing affordability.
Around the world, post-financial crisis property booms driven by low interest rates have left locals struggling to buy homes.
"The tension around foreign investment is always going to be much more acute when affordability is getting worse," said Mr Brendan Coates, a researcher at the Grattan Institute think-tank.
When locals get "priced out of the market", foreign buyers may be blamed even when their effect is small, he said, commenting on the global picture.
A wave of restrictions or taxes on foreign purchases already stretches from Sydney to Hong Kong to Vancouver. Measures targeting foreign homebuyers have included stamp duties, restrictions on property pre-sales to non-residents and limits on the types of homes that can be purchased.
New Zealand is banning foreigners from buying existing residential properties after Prime Minister Jacinda Ardern campaigned during last year's election on pledges including affordable housing. Canada and Australia have rolled out one restriction after another and Singapore just ramped up a tax on overseas buyers. Denmark and Switzerland have restrictions, a Grattan Institute report shows.
Tun Dr Mahathir's comments came at a late stage of the game. Globally, property shows signs of cooling from the post-crisis boom. His concern seems to be sparked not by the property market overheating but, rather, foreign investments that do not benefit Malaysia and what he terms the risk of "a new version of colonialism".
A statement from Dr Mahathir's office on Tuesday said the nation welcomes all tourists, including from China, as well as foreign direct investment that "contributes to the transfer of technology, provides employment for locals and the setting up of industries". It did not refer to Forest City.
"Mahathir has never liked the idea of Forest City or the idea of many foreigners buying up property in Malaysia," said Mr Ryan Khoo, co-founder of Alpha Marketing, a Singapore-based real estate consultancy.
Foreigners will be blocked from buying units at the project and refused visas to live there, Dr Mahathir said at Monday's press briefing.
That left analysts and local officials parsing his words to guess at how bans might work.
The Chinese developer, Country Garden, said the premier's comments clashed with past assurances. The project's targeted buyers have included people from mainland China.
With a wall of Chinese money blamed for pushing up prices around the world, local lawmakers, media and the public can struggle to disentangle xenophobia from legitimate efforts to constrain inflows of capital.
In Australia, "populist reporting" exaggerated the role of Chinese investors, according to Professor Hans Hendrischke at the University of Sydney.
More than 60 per cent of Sydney residents cite foreign investment for price increases, according to a survey by University of Sydney academic Dallas Rogers. That is despite research by Australia's Treasury showing only a marginal impact.
BLOOMBERG
