Hainan moves to cool overheated property sector
China's southern island province Hainan suspended the leasing of land lots and the approval of projects development to curb property speculation, while analysts said Sunday the local government was supposed to take the measure earlier.
Real estate developers had flocked into the province's property market, causing new bubbles after the central government crated a tourism promotion policy, Wei Liucheng, secretary of the Communist Party of China Hainan provincial committee, said at a meeting in Haikou over the weekend.
The provincial government has suspended the approval of land leasing and development until the National Development and Reform Commission (NDRC) approves specific details of a tourism promotion plan, Wei said.
On January 4, the State Council announced that the island would be built into a top international tourist destination by 2020. The promotion plan is still under study at present and scheduled to be approved by the NDRC between March and April.
Home prices soared once news of the plan was released, though the central government has issued a series of policies to cool the overheated property market. In one case, the price of a housing project in Fenghuang Island developed by Guodu Real Estate, based in Zhejiang Province, surged to 70,000 yuan ($10,249) per square meter.
Analysts said the government should have taken the measures earlier.
"Several years ago, local governments leased too many land lots, especially in the golden coast areas," Zhang Huaxue, deputy manager of the China Index Academy, a real estate research institute, said Sunday.
That put the government into a bind because the plan to boost tourism would have been impacted if each developer had followed its own schedule, he said.
The country's top developers, including Vanke and Poly, all invested in properties along the coast, stretching 595 kilometers between Haikou in the north and Sanya in the south.
It is estimated there are more than 100 developers with a total investment of 100 billion yuan ($14.65 billion) in Hainan at present, an insider was quoted as saying by the China Business News.
Some analysts showed concern that the real estate bubble burst that occurred in Hainan nearly two decades ago would possibly return.
"The local government, which learned lessons decades ago, suspended the leasing of land lots in a timely manner," Ding Jiangang, a real estate commentator, was quoted as saying by the Zhejiang Province-based Youth Times. He added that once housing prices reach an unreasonably high level, they would cause the market to fall into disorder.
Home prices in Hainan soared from 1,400 yuan ($205.1) per square meter in 1991 to 7,500 yuan ($1098.75) per square meter in 1993. But the bubble burst dramatically in the middle of 1993 following the State Council's suppressing measures, and developers abandoned 600 uncompleted buildings. Bad loans from four State-owned commercial banks, including Industrial and Commercial Bank of China, involved in the projects amounted to 30 billion yuan ($4.39 billion).
But Zhang Huaxue of the China Index Academy said the situation this time is quite different.
"Most of the developers just speculated on the land lots deal decades ago, but this time the market is much healthier," he said, adding that most of the buyers are from the northeast part of China and Beijing, and more than half of the buyers in Sanya have paid in full.
"The Hainan case is special because of its overheated tourism resources," Zhao Song, director of the land price research institute of China Land Surveying and Planning, said yesterday. "Other provinces may not copy the measures of suspending the offering of land lots to suppress home prices, because the central government has required local governments to ensure the supply of land lots."