Economy

Tough measures to cool Hainan property prices

By Shan Juan (China Daily)
Updated: 2011-02-24 09:53

Haikou - Hainan provincial government has ordered the cities of Haikou and Sanya to launch tough measures to cool local property prices, which have soared after the government announced plans to develop the island province into an international tourism hotspot.

Qu Jianmin, deputy secretary-general of the provincial government, said on Wednesday that local governments should take measures to increase the housing supply and suppress speculation.

Haikou and Sanya were told to launch the measures before the end of March.

The property price in Sanya was ranked fifth highest nationwide with an average price of 18,319 yuan ($2,784) for each square meter (sq m), according to the research agency, Elivecity.

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The State Council told provincial governments to launch their measures before mid-February, but so far only 15 have complied, according to the Beijing News. However, the property market is so important for local fiscal revenues and economies that governments are hesitant to impose new measures.

Wei Liucheng, Hainan provincial Party chief, said that almost 60 percent of the provincial government's revenue comes from the real estate industry.

In 2010, local revenue surged to more than 27 billion yuan ($4.1 billion), an increase of 52 percent on the previous year. Meanwhile, investment in the real estate sector totaled almost 46.8 billion yuan, increasing 62.5 percent year-on-year, according to official statistics.

Local property prices skyrocketed after the State Council's January announcement of the plan to turn Hainan into an international resort, a factor which helped provide a substantial boost to the local economy, said Wei, who is also a deputy in the provincial people's congress.

Despite concerns that such rapid economic growth was unhealthy and difficult to sustain, Wei recognized that, "for a certain period of time, the real estate sector would remain a pillar industry of the local economy".

However, he conceded that property industry didn't fully reflect the local level of economic and social development.

Fu Xing, vice-chairman of the Standing Committee of the Hainan Provincial People's Congress and President of Hainan Provincial Federation of Trade Union, said the government's revenue shouldn't be so reliant on the property industry, and warned of its potential harm to overall economic growth.

Jiang Sixian, vice-governor of Hainan province and Party secretary of Sanya city, said that due to special environmental advantages and the government policy to develop the island, the local housing price was generally higher than the national average.

He added that prices will decrease in the long run as more affordable government-subsidized housing came onto the market. "The local real estate industry should focus more on healthy and sustainable development instead of being attracted by short-term fast money," said Jiang.

Wang Lu'an, a member of the Provincial Chinese People's Political Consultative Conference, who is also a local property developer, said that the high price of property was a concern.

"The current price doesn't match local people's incomes and might easily result in a bubble which would harm the long-term development of the real estate sector," he noted.

High expectations have lured property developers to the island and at least 100 of them, backed by an investment of 100 billion yuan, are now operating on the island, according to reports in the China Business News.

As a result, the average price of a housing project on Fenghuang Island in Sanya city climbed to 70,000 yuan for each square meter on one occasion last year.