Hainan real estate bubble grows
China's housing bubble isn't just growing in major cities. The government's plan to make China's Hainan Province, an island in the South China Sea, an international tourism destination spiked local property prices, and speculators reserved hundreds of houses for huge profits.
"If you bought several apartments in Hainan before 2007, you can make a fortune now," said Liu Yuan, a sales manager with IFM Investments Limited's Sanya branch, in a phone interview with the Global Times.
"An apartment in Sanya that sold for 140,000 yuan ($20,507) in 2005 is now worth 480,000 yuan ($70,311) or even higher, and the average [house] price here can equal major cities like Beijing and Shanghai. Although the house price is rising by about 1,000 yuan ($164) per square meter each day, people just come and buy like picking up tomatoes in the supermarket," Liu said.
Liu's team just broke a record by selling more than 80 apartments in January.
According to Liu, the average house price in Sanya jumped from 9,000 yuan ($1,318) per square meter last October to nearly 20,000 yuan ($2,930) this January.
In Haikou, the provincial capital, house price growth has reached 5 percent month-on-month. In some hot areas like Phoenix Island, a man-made tourism island situated on Sanya Bay, housing prices hit 90,000 yuan ($13,183) per square meter at the end of January.
Housing bubbles?
According to some Chinese media, a range of promotional events have been organized to woo investors to Hainan, such as hosting housing fairs in Chinese mainland cities like Shanghai and Beijing.
"There were plenty of advertisements and road shows for investing in Hainan's international tourism project in the second half of 2009, " Liu said.
Promotion seems to have got results. The Shanhuwan real estate project in Haikou sold 600 of its 643 apartments in the two weeks immediately after it opened for sale, with many buyers from outside Hainan.
"Most of these buyers made their purchases not for self-use but for investment," Liu said. "They are businessmen from Zhejiang, Jiangsu and mine owners from Shanxi, and some are even from overseas."
"Three years before buyers from Jiangsu and Zhejiang only accounted for 30 percent of the total number, but now it has risen to 70 to 80 percent," Liu told the Global Times.
In 2007, the number of apartments bought by Jiangsu buyers was 270, and in 2009 the number exceeded 340, according to data from IFM Investments.
Xin Gaoping, a 45-year-old female accountant from Hong Kong, is one of the private investors. "I have one apartment in Sanya Bay, and I bought one more last December," she said. "Now my two apartments both rent as short term hotels."
Corporate investors are coming too. Chinese media report that more than 100 corporations from all over the country have made investments exceeding 150 billion yuan ($22 billion) in Hainan so far.
"Big real estate developers like Vanke have acquired more than 50 hectares since last November, and some industrial corporations also did the same, though they did not have a plan to build new houses in the near term," said Liu. "They are just reserving till the price is sky high."
According to the provincial administration of land, environment and resources, Hainan has approved construction on 3,164.7 hectares of land, including on 1,522.65 hectares where construction is already underway.
The latest research from the China International Capital Corporation Limited (CICC) shows Hainan's real estate indicators hit a new high at the end of last year, as planned investment in the sector was 20 billion yuan ($2.9 billion), and actual investment was 28.79 billion yuan ($4.2 billion), up 44.3 percent year-on-year.
A lose-lose case?
In response to the potential bubbles, local authorities are planning a temporary policy barring developers from buying new building land before a specific plan gets approval from the National Development and Reform Commission, the country's top economic planner, in order to cool down speculation in the housing market.
However, experts worry that such move may cause land supply shortages and hurt small- and mid-sized developers most.
"This policy is a warning signal to developers who postpone property sales to get a higher selling price. Once this policy applies to whole China, many small-scale developers will be closed due to poor funding ability," the Shanghai-based GuoTai Junan Securities, said in a report on China's property sector released February 2. "This sector will experience structural adjustment starting from this year, with sold area to decrease by 20 percent on average. Lots of developers will face a decrease in net profit in 2011."
