Hainan guards against real estate bubble
The boom-burst circle in the 1990s was recorded in soaring home prices. Home apartment price was 1,350 yuan per square meter in 1988, but soared nearly 500 percent to 7,500 yuan per square meter in 1993, according to the 1996 Year Book of China Real Estate Market compiled under the supervision of the China Real Estate Association.
The bubble exploded in June 1993 after the central government suddenly declared to tighten lending to real estate developers. Many developers abandoned numerous unfinished buildings and left behind 30 billion yuan of bad bank loans in the development projects.
Hainan property market picked up in 2007 after ten years of recovery, especially at the end of 2009, sparking off wide worries and doubts from the society, said Jiang. Despite worries, many experts argued the current real estate boom was quite different from that in the 1990s.
"Most money flowing into the real estate in Hainan came from banks in the 1990s. But now individual investors rushed in, about 70 percent of the second-home buyers in Sanya did not use mortgages and paid off full amounts of home prices in one time," said Zhu Zhongyi, vice chairman of China Real Estate Association, "Thus the situation poses little threat to national financial system, though some to individual assets now."
"Market demand changed totally. Few Chinese could afford a second home in the 1990s, but now potential buyers are enormous. In the 1990s, most buildings were made for offices and bought by enterprises, but now most are tailor-made for individuals and used as second-homes," said Chi Fulin, president of the Hainan-based China Institute for Reform and Development.
The boom in Hainan property is part of a near country-wide housing hike since the government introduced an economic stimulus involving 4 trillion yuan late in 2008.
Fearing speculation, the central government has introduced a series of policies to curb housing prices, including improved sales tax and more affordable housing supply for the disadvantaged. The latest move came Thursday when the state-assets watchdog, the State Assets Supervision and Administration Commission (SASAC), told major state-owned enterprises whose core business is not real estate to quit the market.
Hainan has about 1,528 kilometers of coastal lines and about half could accommodate real estate construction, said Jiang.
Hainan was designated a province in 1988 and became China's largest special economic zone the same year, enjoying preferential development policies.
The 35,000-square-kilometer island, with about 8.7 million permanent residents, boasts year-round sub-tropical beaches, forests and diverse ethnic cultures.
The central government Jan. 4 announced in a guideline that it aimed to turn Hainan into a top international tourist destination by 2020.