Forest City: Inside Malaysia’s Chinese-built ‘ghost city’

Forest City was meant to house one million people – but only a handful of its units are occupied

(BBC) – A year ago, the 30-year-old IT engineer moved to Forest City, a sprawling Chinese-built housing complex in Johor, on the tip of southern Malaysia. He rented a one-bedroom flat in a tower block overlooking the sea.

After six months, he’d had enough. He didn’t want to continue living in what he calls “a ghost town”.

“I didn’t care about my deposit, I didn’t care about the money. I just had to get out,” he said. We had arranged to meet in the same tower block he used to live in.

“I’m getting goosebumps just being back”, he said. “It’s lonely around here – it’s just you and your thoughts.”

“I managed to escape this place,” Nazmi Hanafiah laughs, slightly nervously.

China’s largest property developer Country Garden unveiled Forest City – a $100bn (£78.9bn) mega-project under the Belt and Road Initiative – in 2016.

At the time, the Chinese property boom was in full flow. Developers were borrowing colossal sums of money to build both home and abroad for middle-class buyers.

In Malaysia, Country Garden’s plan was to build an eco-friendly metropolis featuring a golf course, waterpark, offices, bars and restaurants. The company said Forest City would eventually be home to nearly one million people.

Eight years on, it stands as a barren reminder that you do not need to be in China to feel the effects of its property crisis. Currently, only 15% of the entire project has been built and, according to recent estimates, just over 1% of the total development is occupied.

Despite facing debts of nearly $200bn, Country Garden told the BBC it is “optimistic” the full plan will be completed.

‘It’s creepy here’

Forest City was billed as “a dream paradise for all mankind.” But in reality, it was aimed squarely at the domestic Chinese market, offering aspirational people the chance to own a second home abroad. Its selling prices were out of reach for most ordinary Malaysians.

For Chinese buyers, the property would be an investment that could be let out to local Malaysians, such as Mr Nazmi, or used as a holiday home.

In reality, Forest City’s isolated location – built on reclaimed islands far from the nearest major city Johor Bahru – has put off potential tenants and earned it its local nickname “Ghost City”.

“To be honest, it’s creepy,” says Mr Nazmi. “I had high expectations for this place, but it was such a bad experience. There is nothing to do here”

Forest City certainly gives off a strange atmosphere – it feels like an abandoned holiday resort.

On the deserted beach, there’s a shabby children’s playground, a rusting vintage car and, perhaps aptly, a white concrete “staircase to nowhere”. By the water there are signs warning against swimming because of crocodiles.

In the purpose-built shopping mall, many of the shops and restaurants are closed – some units were just vacant construction sites. In a surreal touch, there is an empty children’s train doing endless laps around the mall while playing “Heads, shoulders, knees and toes” on loop in Chinese.

Next door, in Country Garden’s showroom, there is an enormous model city showing what a completed Forest City would look like. Sitting at the sales stall, are a couple of bored-looking employees – the sign above them said: Forest City. Where Happiness Never Ends.

This was what Country Garden imagined Forest City would look like

By far the biggest draw here is the area’s duty-free status. On the beach you’ll find piles of discarded alcohol bottles and pockets of local drinkers, who provide the bulk of human activity here.

When night falls, Forest City becomes pitch dark. The enormous apartment blocks which loom over the complex each contain hundreds of apartments, but no more than half a dozen have their lights on. It’s hard to believe anyone actually lives here.

“This place is eerie,” says Joanne Kaur, one of the few residents I encounter. “Even during the day, when you step out of your front door the corridor is dark.”

She and her husband live on the 28th storey of one of the tower blocks – they’re the only ones on the whole floor. Like Mr Nazmi, they are renters and, also like Mr Nazmi, they plan to leave as soon as they can.

“I feel sorry for people who actually invested and bought a place here,” she says. “If you were to Google ‘Forest City’, it’s not what you see here today.

“It should be the project that was promised to the people, but that’s not what it is,” she added.

Most of the shops and restaurants are closed in the mall

Speaking to people in China who bought units in Forest City is not easy. The BBC did manage to reach a handful of owners indirectly, but they were reluctant to comment, even anonymously.

However, social media offers some anecdotal evidence. Under a post praising the development, one buyer from Liaoning province said: “This is very misleading. The current Forest City is a ghost town. There are no people at all. It is far from the city, has incomplete living facilities, and it is difficult to move without a car”.

Other comments asked how they could get a refund on their property, with one saying: “The price of my unit has dropped so much, I’m speechless.”

A tough sell

This kind of frustration is being felt across China, where the property market is in disarray.

After years of rampant borrowing by developers, the government feared a bubble was forming and imposed strict limits in 2021. “Houses are for living in, not speculation” was the mantra of China’s leader Xi Jinping.

As a consequence of these measures, major companies have run out of cash to finish huge projects.

In October, Country Garden was forced to abandon two projects in Australia, selling off an unfinished development in Melbourne and another in Sydney.

Local political factors have also contributed to the current situation at Forest City. In 2018, Malaysia’s then prime minister Mahathir Mohamad restricted visas for Chinese buyers, citing his objection to a “city built for foreigners”.

Some analysts have also questioned the wisdom of building a mega-development in a country whose political and economic environment is unstable. The current Malaysian government is supportive of the Forest City project but, to a prospective buyer, it is unclear how long that will last and to what extent.

Other unexpected issues, such as Covid travel restrictions and controls on how much money Chinese citizens could spend abroad, have especially hampered overseas projects launched by giants such as Country Garden.

“I think they probably pushed it a bit too far, too fast,” says Tan Wee Tiam from KGV International Property Consultants. “Before launching a hugely ambitious project like this, the critical lesson to learn is ensuring you have sufficient cash flow.”

This week the world’s most indebted real estate company, Evergrande, faced a liquidation hearing at a court in Hong Kong. In the end, the Chinese company was given a six week reprieve to agree on a repayment plan with its creditors as the judge adjourned the hearing for a seventh time.

Country Garden insists the current situation in the Chinese property market is just “noise” and its Malaysian operation “runs its business as usual”.

It also said plans to include Forest City in a new special economic zone between Malaysia and neighbouring Singapore showed the project was “safe and stable”.

But without access to cash, it is hard to see how projects such as Forest City can be finished or how it will attract people to live there any time soon. At the moment, Chinese-built property is a tough sell, to put it mildly.

“It’s a chicken and egg situation,” says Eveline Danubrata, from REDD Intelligence Asia. “A developer typically relies on pre-sales to help fund construction.”

“But buyers won’t put their money in if they’re not sure whether they’ll get their apartment keys in the end.”

Ambition and reality

When it comes to China’s property crisis, Forest City is a classic case of ambition versus reality. Some local factors may have contributed to the current situation, but it is proof that building tens of thousands of apartments in the middle of nowhere is not enough to convince people to live there.

Ultimately, the fate of Forest City – and hundreds of projects across China – depends on the Chinese government. Last month, there were reports that Country Garden had been placed on a preliminary list of developers that would receive financial support from the Chinese government – though the extent of that support still is not clear.

It’s unlikely that people like Mr Nazmi will return though: “I will definitely choose more carefully next time,” he says. “But I’m happy I’ve left this place – now I’ve got my life back.”