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Tourists enjoy the pool area at the Shanhaitian Hotel in Sanya, Hainan. The island is home to 259 star-rated hotels, including 20 five-star hotels, to cater to a growing number of travelers. [Photo by Wang Huiyu]

The tropical shores of Hainan are luring surfers and resort-goers, all seeking to escape their city lives for a quiet stretch of beach and sunshine. But now the island has come under the spotlight for a different reason—a property rush raising prices to levels comparable to Beijing and Shanghai.

Deep-pocketed investors from across China's mainland have rushed to snatch up houses, many paying in cash. Sanya, a beach resort on the southern edge of the island and home to a number of five-star hotels, saw its average house price double to around 20,000 yuan ($2,929) per square meter in January this year.

The property boom has prompted big developers to scoop up pristine beachfront plots to lock in future returns. In December 2009, China Railway Real Estate Group agreed to pay an astronomical 1.68 billion yuan ($246 million) for a plot of land in central Sanya, the most expensive land transaction on the island.

With crystal clear seas and palm-lined beaches, it is not difficult to see why people choose Hainan as the spot for their second or third home or even for retirement. Adding fuel to the property fire was excessive nationwide liquidity as state banks opened lending floodgates to shore up the economy.

But what really inflated the bubbles was a government program to turn Hainan into an international tourist destination by 2012. In addition to an array of measures to boost infrastructure and services, the island also received a green light to tap into sports lotteries and open more duty-free shops for departing foreign tourists.

In the five days following the government initiative announcement, house purchases on the island province were comparable to sales throughout the whole year in 2008.

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