China property

Plans to transform Hainan into China’s largest free-trade zone put it back on developers’ investment radar

China’s ‘Hawaii’ expected to register more rapid growth than country overall in five to 10 years

PUBLISHED : Wednesday, 18 April, 2018, 8:01am
UPDATED : Wednesday, 18 April, 2018, 8:01am

The tropical island of Hainan is back in favour among mainland developers, after China rolled out a slew of reforms to transform it into the country’s largest free-trade zone, according to market watchers.

President Xi Jinping also unveiled measures to support the development of horse racing and sports lotteries as part of the plan to boost the island’s economy, which has been dubbed as China’s Hawaii, in an announcement over the weekend.

“The policies are good. Our team has been looking at potential projects in Hainan since last year,” said

Xu Tonghui, the deputy general manager for corporate branding and marketing at Longfor’s.

Raymond Cheng, a director at the Hong Kong and China property equity division of CIMB Securities, said mainland developers would extend their reach to the island as the policies unveiled will boost its economic development.

“On the back of the central government’s favourable policies, we believe Hainan’s economy will register more rapid growth than China overall, in the next five to 10 years,” he said.

Investors propel shares of Hainan linked companies on plans to start horse racing, sports lotteries

Cheng said Agile Group Holdings could be the greatest beneficiary among Chinese developers, given its high exposure to Hainan. “Agile is one of the few first movers in the Hainan property market, where it developed its first residential project back in 2009,” he said.

Cheng said Agile had a total land reserve of 7 million square metres in Sanya and Haikou, and that the total value of projects to be built on this land could be worth 100 billion yuan (US$15.92 billion).

In 2017, Agile’s Clearwater Bay development registered sales worth 16.9 billion yuan, the top sales figure for a single project in Hainan. It was followed by the 14 billion yuan registered by China Evergrande Group’s Ocean Flower Island and Country Garden’s 12.3 billion yuan from the sale of Coral Palace, according to data from the China Real Estate Information Corporation.

Projects in Hainan account for about 25 per cent of Agile’s net asset value. Evergrande, China’s third-largest developer by sales, however, remains the largest land holder, with 17 million square metres on the island.

On the back of the central government’s favourable policies, we believe Hainan’s economy will register more rapid growth than China overall, in the next five to 10 years
Raymond Cheng, director, Hong Kong and China property equity division at CIMB Securities

Evergrande built an island for Ocean Flower Island, its massive residential project, and plans to build convention centres, theme parks and shopping centres on another artificial island off Hainan’s northwest coast.

Other property developments include Fosun International’s US$1.6 billion Atlantis resort, which will boast of underwater hotel suites and a water park, and is due to open in May. MGM Resorts International opened the Grand Sanya in 2012 and plans two more properties with its joint venture partner, Diaoyutai State Guest house.

Some market watchers pointed to the lack of opportunities for speculation under the policies unveiled this weekend. “I don’t think there are lots of speculative opportunities in Hainan’s property market,” said Tan Yifei, a financial commentator.

He said the official statement about the Hainan Free Trade Area clearly states that “plans should be drawn up to stabilise market expectations and prevent any speculation”.

“It’s just like the Xiongan New Area. There was an outburst of stock speculation when the plan was announced, but it turned out that the government had put out any chance of property speculation,” said Tan.

Local governments are also taking measures to avoid speculation. Hainan province’s housing commission on Monday ordered local governments to ensure stability in property sale volumes and prices, and prevent any home flipping. People found speculating will be stripped of qualification for the property market for life.

On March 31, Hainan imposed a ban on non-locals buying a second home in the province, and stipulated a 70 per cent down payment requirement.

Longfor’s Xu said the company had nothing under development at the moment. “Currently, we have not confirmed any project. A lot of details. For example: which sector and where in Hainan, are not out yet,” said Xu.