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Home » Opinion » Chinese Views
Bubble fears as housing prices soar
Source: Xinhua |
April 5, 2010, Monday
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Print Edition
Print Edition
Cai Hui, 47, a businessman from Fuzhou in Fujian Province, marveled at how house prices rocketed in south China's Hainan Province after the central government announced Hainan was to become a global tourist resort.
He bought an apartment at 3,500 yuan (US$512) per square meter in Jiusuoxin District in Ledong County at the end of last year and sold it at about 10,000 yuan per square meter at the end of January, pocketing about 600,000 yuan in merely a month, almost double the money he spent.
The fast expansion of the real-estate market in the island caused fears that the island might repeat its boom-to-bust trajectory in the 1990s real-estate market.
Hainan completed 6.44 billion yuan of property development in the first two months of this year, up 180 percent from the same period of last year, according to the Hainan Provincial Bureau of Statistics on Thursday. Real-estate sales jumped 380 percent to 2.21 million square meters in floor space and rose 750 percent to 24.33 billion yuan in trade volume in the first two months from the same period last year.
The government should intervene to map out policies and guarantee healthy development of real-estate industry in Hainan, said Zou Deci, an academician member of the Chinese Academy of Engineering and honorary chairman of China Academy of City Planning at the Boao International Tourism Forum last month.
"For example, many international tourist resorts encouraged foreign tourists to come and live, but did not allow them to buy homes. Regulations like that are necessary in Hainan, otherwise the market demand might balloon to a degree that could never be met," Zhou said.
Many people, however, argue that Hainan will not repeat the real-estate bubble of the 1990s as the situation today is quite different. Jiang Sixian, Vice Governor of Hainan Province, is one of them.
He said there were four reasons for the 1990s property bubble which no longer existed - loose regulations when the province was set up; some banks' blind loans and even direct involvement in the market; immature plans for Hainan developments and low national GDP which led to low demand from across the country for property on the island.
Apartment prices were 1,350 yuan a 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 tightened lending to real estate developers. Developers abandoned many unfinished buildings and left behind 30 billion yuan of bad bank loans for development projects.
The Hainan property market picked up in 2007 after 10 years of recovery, especially at the end of 2009, said Jiang.
"Most money flowing into the real estate in Hainan came from banks in the 1990s. Now individual investors rushed in. About 70 percent of the second-home buyers in Sanya did not use mortgages," said Zhu Zhongyi, vice chairman of China Real Estate.
"In the 1990s, most buildings were 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 a 4 trillion yuan economic stimulus in late 2008. Fearing speculation, the central government has introduced a series of policies to curb housing prices, including improved sales taxes and more affordable housing for the disadvantaged.
Last month, the State Assets Supervision and Administration Commission, told major state-owned enterprises whose core business is not real estate to quit the market.
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.
He bought an apartment at 3,500 yuan (US$512) per square meter in Jiusuoxin District in Ledong County at the end of last year and sold it at about 10,000 yuan per square meter at the end of January, pocketing about 600,000 yuan in merely a month, almost double the money he spent.
The fast expansion of the real-estate market in the island caused fears that the island might repeat its boom-to-bust trajectory in the 1990s real-estate market.
Hainan completed 6.44 billion yuan of property development in the first two months of this year, up 180 percent from the same period of last year, according to the Hainan Provincial Bureau of Statistics on Thursday. Real-estate sales jumped 380 percent to 2.21 million square meters in floor space and rose 750 percent to 24.33 billion yuan in trade volume in the first two months from the same period last year.
The government should intervene to map out policies and guarantee healthy development of real-estate industry in Hainan, said Zou Deci, an academician member of the Chinese Academy of Engineering and honorary chairman of China Academy of City Planning at the Boao International Tourism Forum last month.
"For example, many international tourist resorts encouraged foreign tourists to come and live, but did not allow them to buy homes. Regulations like that are necessary in Hainan, otherwise the market demand might balloon to a degree that could never be met," Zhou said.
Many people, however, argue that Hainan will not repeat the real-estate bubble of the 1990s as the situation today is quite different. Jiang Sixian, Vice Governor of Hainan Province, is one of them.
He said there were four reasons for the 1990s property bubble which no longer existed - loose regulations when the province was set up; some banks' blind loans and even direct involvement in the market; immature plans for Hainan developments and low national GDP which led to low demand from across the country for property on the island.
Apartment prices were 1,350 yuan a 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 tightened lending to real estate developers. Developers abandoned many unfinished buildings and left behind 30 billion yuan of bad bank loans for development projects.
The Hainan property market picked up in 2007 after 10 years of recovery, especially at the end of 2009, said Jiang.
"Most money flowing into the real estate in Hainan came from banks in the 1990s. Now individual investors rushed in. About 70 percent of the second-home buyers in Sanya did not use mortgages," said Zhu Zhongyi, vice chairman of China Real Estate.
"In the 1990s, most buildings were 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 a 4 trillion yuan economic stimulus in late 2008. Fearing speculation, the central government has introduced a series of policies to curb housing prices, including improved sales taxes and more affordable housing for the disadvantaged.
Last month, the State Assets Supervision and Administration Commission, told major state-owned enterprises whose core business is not real estate to quit the market.
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.
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