By Property Soul (guest contributor)

I watched a recent Hong Kong TV programme about buying properties in Malaysia’s Penang.It was a big surprise to see real estate in Penang being positioned as investment properties. To Hong Kong people, Penang is a beach holiday destination in Southeast Asia similar to resort places like Phuket or Bali. Foreigners go there to buy their holiday or retirement homes.

How could marketers convince buyers that holiday homes are investment properties no different from high end condos in capital cities?

Let’s try to summarize the six common gimmicks that marketing agents deployed to sell real estate projects overseas.

Gimmick #1: Be overly upbeat on economic performance and outlook

During the interview, the spokesperson from a property agency in Penang speaks highly of Malaysia’s economy: “Malaysia is a young and vibrant country, with a high population of young people and high annual growth in GDP …”

It gives the impression that Malaysia is the top Southeast Asian country in terms of investment potential. Throughout the 30-minute documentary, there is no slightest hint of Malaysia’s national debt or currency depreciation.

“Besides, there is no other country like Malaysia that gives so much support of China’s one belt one road policy.”The irony is: The new Malaysian government has always been skeptical of Chinese investment. Mahathir’s first talk with China was to convince them to withhold their two biggest infrastructure projects in Malaysia.

“Above all, George Town has been listed as an UNESCO World Heritage Site since 2008. That’s why tourists all over the world are flocking to Penang and overseas investors are buying up properties here.”What has UNESCO status to do with properties? Are property investors buying at the 1,092 UNESCO world heritage sites?UNESCO has the mission to protect the world’s cultural heritage sites, but not to protect the sites’ property prices.

When our Prime Minister suggested to nominate Singapore’s hawker culture for UNESCO listing at this year’s National Day Rally, I had to google for the judging criteria of UNESCO again.

Gimmick #2: Exaggerate market growth and potential return

The spokesperson in the interview claims that, from 2009 to 2015, property prices in Penang have gone up 75 percent. Current rental return is between 5 to 6 percent.

Do you see the catch here? The base year is the financial crisis in 2009 and the year 2015 is the peak of the market.

What happened afterwards? The local property market has slowed down substantially due to market oversupply and political uncertainty. There are only a handful of new projects launched in 2017. The high end condo market has seen price correction.

Bad news is intentionally filtered with a focus on the impressive 75 percent growth. But what the property agency failed to take note is that Hong Kong property prices have gone up more than 300 percent from 2009 to 2018, with no signs of slowing down and without any negative factor of currency depreciation.

The spokesperson mentioned that Penang is a preferred location for foreign companies to set up their offices in Asia. The investPenang scheme offers incentives, consultancies and partnership opportunities for these companies.

It is true that there are many multinational companies setting up factories in Bayan Lepas Free Industrial Zone in the northern part of Penang. But the good old days of the IT industry in the 1990s have long gone.

To lower labor cost and streamline operations, big companies including Samsung, Seagate, Western Digital, Suzuki Motor and British American Tobacco have shut down their plants and moved out of Penang in the last two to three years.

Gimmick #3: Capitalize on future infrastructure or development plans

Since last year, a hot topic in the Hong Kong media is the Guangdong-Hong Kong-Macau Greater Bay Area (粤港澳大湾区) – China’s ambitious plan to develop a 56,500 square kilometer economic cluster that covers eleven cities.

But so far the only development completed in the cluster is the large residential projects built by property developers. The overpriced units are sold to eager buyers tapping on the future potential of the new economic region.

Does that sound familiar? Think Jurong Lake District and Iskandar Malaysia.

The Hong Kong people bought off-plan homes in the Greater Bay Area. The Singaporeans snapped up Iskandar properties. The Chinese were sold on the Forest City project.

But these future growth areas are only under planning. There are no major industries, employment opportunities or new residents near Forest City yet.

How is it possible for marketing agents to sell so many residential units in an empty place? What extent of imagination does one need to project 700,000 residents living in Forest City by the year 2050 when the condo blocks are practically empty?

Apart from economic zones, there are also international events such as World Expo, Olympic Games and World Cup that bring the host cities into international limelight. These global events are often being capitalized by developers and marketing agents to sell foreign properties to overseas buyers. did a study on how the real estate market performed in ten summer and winter Olympic host cities over the last 20 years. The results show that The Olympics provide only an average boost of 1 percent to the local property market for three years.

For cities like Rio de Janeiro and Vancouver, since there is already excessive supply before the Games, overbuilding and overpricing in anticipation of a booming property market only undermine property prices in the city.

Developers and buyers jumped on the bandwagon of the Tokyo 2020 Olympics in the last few years. But local analysts have already warned of the possibility of a post-Olympic crash after the event.

Gimmick #4: Emphasize affordability and value for money

How affordable are overseas properties?

For the price of a decent unit in Danga Bay, you can only buy a 3-room HDB flat in Singapore.

For the going price of units at Forest City, you are buying at a quarter of what Beijing properties are selling, with full facilities and clean air.

For the amount you pay for that 2,500 sq ft luxurious beachfront apartment in Penang, you can’t even afford a 250 sq ft old flat in the suburb of Hong Kong.

Marketers just have to play with the magic numbers of the selling price and floor area. The big contrasts of can and cannot, have and don’t have immediately become appealing to the buyers. The answer is obvious.

But are we doing apple-to-apple comparisons here? Or are we just settling for less?

What about economic stage of development, standard of living, political stability in the country, building control regulations, landlord-tenant rights etc.?

The Penang property TV programme promotes the city as a sports lovers’ paradise with sunny weather and beautiful beaches. I still remember on a trip to Penang in 2010, the taxi driver complained about how uncontrolled reclamation for property development had caused serious sea pollution in the island. There were countless abandoned half-completed condominium projects along the coastline.

Last month, Hong Kong media found that a project in Guangzhou Foshan is built using bricks so light in weight that walls will definitely collapse in time. The property agent at the sales gallery told the reporter that 40 percent buyers of the Greater Bay Area project are from Hong Kong.

Gimmick #5: Upgrade automatically to align with admirable locations

Do you know that Forest City was advertised aggressively all over China as an affordable project just “next to Singapore”, not a development in Malaysia, Johor Bahru or Iskandar?

What does that mean?

If you tell people you are staying in Forest City, you are living next door to Singapore.

China celebrities Jet Li (李连杰) and Gong Li (巩俐) are Singaporeans. Vicki Zhao (赵薇) is a Singapore PR. Chinese buyers can now live the good life of Singaporeans, in an affordable way.

How many people in China know the difference between Singapore and Johor Bahru? Salespeople at the sales gallery said Forest City is just 1.1 kilometer from the border. There is also a plan to build a high-speed rail station at its doorstep to go direct to Singapore.

The Chinese buyers were taking comfortable coaches to the Forest City sales gallery. They were not stuck in the traffic jams at the Singapore-JB customs for hours.

The secret is: It has nothing to do with the actual distance or traveling time. It is all about familiarity of a name. As soon as a prestigious location or landmark is mentioned, buyers will be convinced that the project is situated in a prime location.

That is why any Iskandar development is located next to Singapore. Any Kuala Lumpur luxurious condominium is near to KLCC. Any Singapore high-end project marketed overseas is adjacent to Orchard Road. Because theoretically, you can reach Orchard Road from anywhere in Singapore in a 30-minute ride.

Gimmick #6: Simplify taxation, ownership and citizenship for foreigners

The spokesperson says in the TV programme, “There is only 30 percent Property Gain Tax for properties sold within five years, and 5 percent thereafter. There is no other tax besides this.”

For Singaporeans buying Malaysia properties, you just have to pay the Property Gain Tax. There is no Additional Buyer Stamp Duty or Seller Stamp Duty.

The trick is to emphasize a lower overhead to buy overseas, and solve the problems of buyer restrictions and high purchase costs buying at home.

According to the Hurun Chinese Luxury Consumer Survey 2018, 37 percent of the 224 Chinese High Net Worth Individual respondents are considering leaving the country. Among them, 12 percent have already emigrated or are applying to do so.

As I said in my previous blog post “Forest City proves buying an overseas home is to buy a cat in a sack”,Country Garden is not just selling the Chinese buyer a 5-star home in Iskandar. It is selling them the dream to be an international citizen by helping them to apply for PR though Malaysia My Second Home Programme.

At a time when more Hong Kong people are disillusioned and leaving for more liveable countries like Taiwan, it makes the Malaysia My Second Home Programme very attractive.

It is not wrong to promote the unique selling position of an overseas property project. But why can’t the developers and marketing agents objectively present the full picture and cover all the pros and cons?

If the overseas project is such a good buy, why are they afraid to show the true facts and actual figures, to let buyers see both sides of the coin and make their own purchase decision?

By guest contributor Property Soul, a successful property investor, blogger, and author of the No B.S. Guide to Property Investment.

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