Prime Minister Mahathir Mohamad shook up the real estate market in Johor with his latest announcement.

On Aug. 27, he declared that foreigners were not allowed to buy residential units in the Forest City project, located in the Iskandar Economic Zone in Johor.

Said Mahathir:

"One thing is certain, that city that is going to be built cannot be sold to foreigners. We are not going to give visas for people to come and live here.

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

Bad news for investors

This is unwelcome news for anyone who bought property in Forest City, particularly those who had already invested in the project.

Their pool of prospective buyers has now been limited to just Malaysian citizens, which makes it harder for them to sell off those housing units.

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Reactions were feisty:

The Forest City project was popular with Chinese investors in particular, although Beijing moved to restrict capital for investment in overseas properties in mid-2017.

Mahathir's announcement came after he recently announced that Malaysia would not be going full steam ahead with the East Coast Railway project, which is backed by China, and that all options were being studied.

Political concerns?

Politics might have played a hand in Mahathir's decision on the Forest City project.

There were a number of excited netizens praising the PM's firm hand:

Singaporeans more popular

In Nov. 2017, the ISEAS-Yusof Ishak Institute released the results of a survey which revealed that Singaporeans were becoming more popular in Johor.

62 per cent expressed satisfaction with Singaporean investments in Iskandar Malaysia (IM) and 76 per cent welcomed Singaporean investment in Johor as a whole, while only 58 per cent were satisfied with PRC investments in IM.

This was apparently a side-effect of increasing Chinese investment in Malaysia:

"This positive response could be because the perception of Singapore has improved as the PRC, now recognised as the biggest investor in IM (Iskandar Malaysia economic corridor), is often invoked as a bogeyman, especially for its role in the Forest City development."

In Jan. 2017, Mahathir had already criticised the Forest City project, saying:

"But when foreigners buy land, there is not even an inflow of capital. Much of the money will be borrowed locally. And they can do their business with their own banks."

It appears he hasn't forgotten about Forest City after taking power.

Top image from the Forest City Johor Facebook page.