China''s premier holiday resort experiences dramatic property boom

Summary
The report describes the reasons behind the booming property prices in China''s only tropical seaside resort market. Various government policies to support the economic growth of Hainan Island including tourism, casinos and an offshore financial centre are behind much of the boom.

Analysis
Price growth may stabilise following 2 months of frantic activity but there are no signs of recent price gains going into reverse. There are no year round, seaside holiday destination alternatives in China for 1.4 billion Chinese within 3 hours flight. Hokkaido in Japan may be cheaper but has difficulties for Chinese buyers who feel more at home with winter sun than winter sports.

I see no danger of prices falling in Sanya, as things stand, the main threats to prices come from government intervention to slow the market in some way and mass development of other seaside locations around the island not too far from Sanya. I do however think prices have peaked for the time being and will take some time to consolidate, but Sanya is becoming the destination for rich Chinese to go for their holidays and informal business meetings take place. Totally different in nature to the French Riviera but it plays a similar role. I had a breakfast meeting over Chinese new year with a company based in Liaoning - much nicer to meet in Sanya at this time of year than in north east China, and they brought their whole senior management team with them as a company incentive trip. The company chairman owns his own apartment there. Owning an apartment in Sanya has become the latest status symbol, to own a property in Sanya is now to be a member of the elite ''jetset'' club.

I do not see the Sanya market as being at all similar to a place like Dubai. The cycles are different for one thing. Dubai''s recent problems were several years in the making, Sanya has only just got going and the whole island has yet to be developed as a tourist destination with activities to suit a whole range of tastes and budgets. Sanya has yet to develop a big water park and other mass market attractions that will continue to stimulate further growth.