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February 3, 2010

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Property boom hits tropical paradise

PLANS to turn Hainan Province into a showcase international tourism destination have attracted new and old project developers and forced restrictions to quell the fever and avoid a housing blowout.

The demand for real estate in Hainan Island, China's southernmost province, has reached an unprecedented fever pitch following the State Council's release on December 31 last year - just over a month ago - of plans detailing its development into an international tourist destination.

A large number of property developers have flocked to the region, raising concerns about an increased housing bubble.

Provincial authorities have responded by saying they will suspend land leasing and development approvals, step up efforts to build affordable housing and strengthen market planning and land supply regulations. The measures are designed to channel the real estate sector's development in a healthy and steady manner and curb property speculation.

The central government's plan involves developing the island into a top international tourist destination over 10 years.

The plan's six strategies: making Hainan a pilot region for China's tourism industry reform, building it into a world-class leisure travel and holiday tourist destination, establishing a showcase zone for China's ecological development, making it a major platform for international economic cooperation and cultural exchange, developing resources in the South China Sea and developing the island into a service center and a modern national tropical agricultural base.

According to the state plan, by 2015 Hainan will improve sharply to meet international standards in fields such as tourism management, marketing, services and product development. The added value of the tourism industry will account for more than 8 percent of the region's gross domestic product, while that of tertiary industry will account for more than 47 percent.

The gains will also extend to education, public health, culture, social security and the ecological environment. By 2020, tourism industry's added value will account for more than 12 percent of the region's GDP, while that of tertiary industry will account for more than 60 percent.

The plan also emphasised protecting the ecology. By 2020, plantation areas should be no less than 718,000 hectares, with basic farmlands no less than 623,300 hectares.

Zhao Benshan, a household-name comedy actor from northeast China, recently added fuel to the real estate craze with a 1.3-billion-yuan development project, involving a movie base and holiday resort on 53.33 hectares.

Also, commercial real estate developer Pan Shiyi renewed marketing of properties that he developed in Hainan in 2001 and had stopped selling. At the time, the price was about 6,000 yuan per square meter. But Pan now believes they can sell for more than 20,000 yuan per square meter.

However, having gone through a housing crash on the island in 1993, Pan is well aware of the deep downside of the bubble bursting.

According to a study by Sino-SeaBound Investment Group, 85 percent of buyers in the city of Sanya are from outside the island. But outside buyers with hot money are forcing the local government to adopt its new control measures.


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