Hainan housing sector booming

A recent State Council decision to transform Hainan into a top travel destination over the next decade has injected new vigor into real estate on the island. But with most purchases being speculative in nature, many units are bought but not occupied. And that has prompted concerns of unhealthy growth in the market.

China's decision to develop Hainan Province into a top international tourism destination has given the property sector a big boost. The island is seeing an increasing number of home buyers.

Ms Wang, home buyer from Changchun, said, "The weather in Hainan is good for people from the northeast. But prices in Haikou are to high now, so we've come to Qionghai instead."

Su Wu, Property developer of Qionghai City, said, "We've got lots of interested buyers from Beijing. If I have to describe our clients, I would say they are like supermarket customers. All the people in the property sector have the same feeling. Too many people are calling us for information. They are buying houses as if they are buying vegetables. "

Mr Su Wu says, the average property price in QiongHai was only 2,000 yuan per square meter in August last year. But now, the price has jumped to 6,000 yuan per square meter. Many unfinished projects have already been sold.

Property developers say, nearly 80 percent of the buyers in Hainan are from outside. Many buyers fear if they don't act quickly enough, they could end up with limited options.

Zhang Xiaoyi, general manager of SH Pinghai Investment Co LTD, sid, "In the early 90s, China did not have a clear vision for Hainan's development, and there wasn't much demand. The region mainly relied on planned economic development. But after 20 years, the region's growth has been strongly supported by the economic sector. The country also has very good GDP growth, and people's daily lives have also improved. So there is a huge demand for developing the province. "

There is no doubt that Hainan has the best coastal resources for property buyers. But analysts still worry that speculators could leave region with too many empty pre-owned properties. Figures show, that some parts of the province are selling more than ten new houses every day. They fear Hainan could sell all its new homes before the Chinese New Year, which could lead to unhealthy development in the region's housing sector.

Xia Feng, analyst of China Institute for Reform & Dev't, said, "One of the reasons that has pushed up Hainan's property prices is the increasing number of home buyers from other cities. Many people prefer the tropical atmosphere here, especially the elderly. They have savings, and the island can be a good choice. Besides, it's not just Hainan that is suffering from rising house prices. There is room for further price increases, but the growth rate is too fast now. "

Analysts say, it's dangerous for there to be more than 10 per cent of properties vacant in the housing market. But the number has already reached over 30 percent or more in some projects in Sanya.

Xia Feng said, "There are too many empty houses. One of the reasons is because there is too much speculation in the market. Once demand starts falling, housing prices will fall. This will cause huge losses for speculators."

Analysts say, it's reasonable for the region to launch macro control measures to prevent too much speculation in the real estate market. And tightened market controls could stop the region from having housing bubbles. Since the country is turning the island into a premium travel destination, they believe the region's property sector will become healthier in 2010.