In anticipation of supportive policies to celebrate the 30th anniversary of Hainan as a special economic zone, not a few investors bought Hainan concept stocks, including Agile Property Holdings (03383.HK), which has a large land bank in the province.
Indeed, there are several new measures that are expected to boost Hainan’s economy, but the local government surprised the market by unveiling the toughest property curbs on Sunday night.
Under the new policy, non-locals cannot buy homes in Hainan’s three major cities, namely Haikou, Sanya and Qionghai, unless they can provide official proof that they have contributed to the local social security fund for 60 months.
The new rule essentially limits the buyers to people who have worked in those cities for a long time. In other words, speculators are barred from acquiring property there.
There are four specific districts where property is simply off-limits to outsiders. In other areas, only non-locals who can prove they have paid social security for 24 months will be allowed to buy.
Moreover, all home buyers are not allowed to resell their properties in the first five years after acquisition.
It is said that shortly after Chinese President Xi Jinping left Hainan for Beijing after the Boao Forum earlier this month, local government officials held urgent meetings to hammer out the latest property curbs.
Apparently, Hainan’s latest policy on property came from the central authorities to conform with Xi’s dictum that “housing is for living in, not for speculation”.
Many local governments are reluctant to roll out harsh property rules as they continue to depend on land sales as the main source of fiscal income.
But the central government has also offered a number of policy incentives for Hainan, such as allowing the province to develop horse racing, sports lotteries and a free trade port.
All this has given Hainan enough room to clamp down on property speculation.
Hainan is also seen as a testing ground to help local governments transform their typical budget model that relies a lot on land sales receipts to one that relies on other income streams.
The province has a population of only 8 million, and its housing market is dominated by non-local investors.
The latest restrictions are expected to freeze demand from these non-local investors. But since the purchasing power of local buyers is a lot weaker, Hainan’s property market is set to hit the wall.
This article appeared in the Hong Kong Economic Journal on April 24
Translation by Julie Zhu
[Chinese version 中文版]
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