Hainan property developers remain optimistic despite falling prices
Since gaining popularity as a tourist destination, China's Hainan island has seen a boom in property development projects.
Property projects are sprouting up rapidly in Hainan such that there's hardly any space left undeveloped.
And developers continue to be optimistic of the property market despite falling prices and the high number of vacant units.
Currently, about 60 to 80 per cent of these units are vacant.
Land with a view is hot property in Hainan, and the scarcity of seaside land has led developers to use it as a marketing tagline.
A fully-furnished unit located right next to the beach and close to a newly-built mega convention centre goes for US$2,900 per square metre. This is about 20 per cent lower than the market rate in 2009, when property values were at their peak.
In spite of this, developers believe there is still genuine demand.
Tiley Real Estate marketing director Ji Cheng, said: "In Hainan, seaside property is increasingly scarce. The market response has been quite good and part of the reason is that there are property purchase restrictions in other places. In Hainan, our customers are generally second, third or even fourth time and above buyers. They have higher purchasing power because there are no restrictions on the purchase of our property. It gives them more choice."
Mission Hills Haikou hotel general manager Yum Siew Wah, said: "The main buyers are from Mainland China and the main factors that are attracting them are the weather in Hainan and also the environment in Hainan. It is very soothing, very relaxing and it has a low (population) density. Nowadays, people go for quality life with a contrast to life in the city."
Experts agree on the potential of Hainan's long term growth as a tourist destination.
They don't believe there will be repeat of the 1990s property bubble, even though up to 80 per cent of units remain vacant.
CEIBS Lujiazui International Finance Research Centre deputy director Gary Liu said: "There is real estate bubble all over China so if you compare Hainan to other parts of China, the bubble would not be so serious. Another difference is the central government. The banking system now has very strict policy on risk financing. They have very strict requirements for down-payment for people to buy a house so the financial leverage in buying a house is not so high."
In Sanya on the southern tip of Hainan island, property tax accounts for more than half of the local government's revenue.
Huge profits continue to motivate authorities to give the go-ahead for property projects.
But there's also concern that over-development will pollute and damage the very coastal landscape that's made it so attractive, especially when the draw of the island is its nature and scenery, not its buildings.
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