Vacation homes

Why demand for residential properties has grown in Hainan


China’s answer to Hawaii

One of the reasons given by Hugo Barra – who now heads Facebook’s virtual reality division Oculus – for leaving smartphone maker Xiaomi was that living in Beijing “has taken a huge toll on my life and started affecting my health”.

Xiaomi is based in China’s capital, which is notorious for its poor air quality. In recent months waves of lung-choking smog have blanketed northern and central China. With visibility severely reduced, authorities have had to cancel flights, shut down highways and impose emergency factory closures (see WiC350).

While not everyone can leave the country like Barra – who spent three years at Xiaomi – the more affluent have opted to migrate south for fresher air.

That’s proven an opportunity for Hainan. Oriental Daily News says that Chinese tourists have been flocking to the tropical island in the South China Sea – the province is sometimes compared to Hawaii because of its sandy beaches and balmy weather – to escape pollution. During the week-long Chinese New Year holiday last month, the island received 5.15 million tourists, up 18% from the same period a year ago. Some enjoyed the fresh air so much that they even decided to purchase a holiday home on the island.

“I bought a second home in Haikou (the provincial capital) two years ago and now all my friends want to buy a house here,” one homeowner from Chengdu told National Business Daily. “The reason they are choosing Hainan is because the quality of air is much better and the weather is more comfortable. It is nice to escape the winter here.”

Industry observers say the majority of holiday-homeowners in the province are “migratory birds” from more northern parts of the country looking to escape air pollution. “More recently buyers have largely come from Beijing, Chongqing and Chengdu. They are hoping to buy a house on the island to avoid the cold weather and smog,” one developer told Oriental Daily News. “For them, it’s like buying health food.” CBN reports that Hainan has seen some of the biggest property price increases nationwide in recent months.

No surprise then that real estate giants like Agile, Sunac, Evergrande and Wanda are rushing to release new projects for sale. To promote a new luxury development project in Lingshui, an ad from Agile simply says: “Run away from the smog, meet at Clearwater Bay.”

Zhong Liansheng, general manager of property developer Sunac, told China Daily: ”Investment in Hainan’s real estate sector is changing from short-term to long-term investment. Property in the tourism sector is also changing from focusing on short stays to longer vacation trips.”

Not everyone is bullish about homes in Hainan, which are often prone to speculation (see WiC48). For a start, the province is overly reliant on the property sector. Real estate investment accounts for 86% of Sanya’s GDP (the most popular tourist destination in Hainan).

The inventory of unsold housing is also alarmingly high despite the recent uptick in transactions. Sohu Finance reported that it would still take 23 months – down from 45 months back in 2015 – for developers to get rid of all their unsold units, assuming no new homes are released for sale during the period.

“Many people initially invest in Hainan because of the region’s blue sky and a change in lifestyle. However, they soon find that the secondary market is not as fluid as they anticipate. Moreover, many developers pile into the market with a frenzy that borders on the irrational, which is reflected in the overall high housing inventory,” Yan Yuejin, a researcher at E-house, a housing portal, told National Business Daily.

For those who want to enjoy Hainan’s sandy beaches, Sohu Finance has an alternative: “It is probably best to buy a home in a first- or second-tier city and use the rental income to pay for a holiday in Hainan. Unless, of course, you really want to live in Hainan,” says the news portal.

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