Drive south

Luxury residential apartments in Sanya have a special appeal for residents in northern parts of China because of the city's tropical weather and resort environment.

According to Alvin Lau, managing director at CB Richard Ellis, non-residents account for some 90 per cent of buyers of luxury residential apartments in Sanya, and the majority of them are from outside southern China.

'We have seen an increase in buyers from northern, eastern and western China - cities like Chongqing,' he adds.

He says the property market follows a seasonal pattern similar to the tourist industry.

The peak tourism period runs from November to February, the same period that sees higher demand for properties.

Despite recent government measures to cool the property market, the long-term outlook for the tropical city is good, according to analysts. New rules were instituted in March to limit the number of apartments owned by a single family. Sanya families who own two or more apartments and non-Sanya registered families who already own one are restricted from making additional personal property purchases.

Lau says the restrictions have been highly effective and have had a substantial impact on the overall market. Housing prices in Sanya have gone down roughly 10 to 15 per cent from the peak in the first quarter of last year.

'We don't see the market being turned around easily,' Lau says, but the fundamentals of demand in Sanya are still good.

'It's not going to be a matter of how expensive or how affordable property is, it will be whether you are allowed to buy or not. People have been paying with cash for a long time, so there is obviously not a lack of buyers.'

Aside from the slight correction, residential property prices have largely stabilised. 'Developers are smart,' Lau says. 'It's not a matter of how much you're going to cut the price that will attract buyers, so prices are likely to remain high.

'The buying power of people investing here now is a lot stronger than in the 1990s. In terms of control for the developers that have evolved, many have strong backgrounds with state-owned enterprises, and are stronger in terms of financial backing and liquidity - and are more able to adjust to the market.'

Sanya's unique characteristics make its property market easy to distinguish. 'As the overall economy of Sanya becomes more sustainable, I can see it becoming more like Thailand's Phuket with a large 'floating' international and wealthy Chinese population,' Lau says.