The Chinese government has launched advance measures to contain a potential property bubble in the island province of Hainan just following the announcement of plans to convert it into a pilot free trade zone hosting China’s first free trade port.
At the 30th anniversary of Hainan’s establishment as a separate province, President Xi Jinping unveiled ambitious plans to convert the whole of the island into a free trade pilot zone, as well as transform it into the site of the first free trade port in China as well as a hub for the gambling and sports betting sector.
The Hainan province government has since launched some of the strictest municipal real estate controls in China, in a move analysts say is designed to forestall speculative investment and the emergence of a property bubble.
On the evening of 22 April the Hainan authorities issued the “Notice Concerning Further Stabilisation of the Housing Market” (关于进一步稳定房地产市场的通知), mandating the immediate implementation of strict real estate purchase restrictions within the province.
The Notice mandates that non-registered residents of the province must provide proof of at least 60 months of personal income tax or social insurance payments within the island for at least one household member when purchasing homes in the three main cities of Haikou, Sanya and Qionghai.
Outside of these three main cities, non-residents who wish to purchase commercial housing must provide proof of at least 24 months of personal income tax or social insurance payments to local government.
In addition to these measures, the Hainan province authorities also require a 70% down payment for housing purchases and impose a ban on the re-sale of properties for a five year period.
Even prior to the announcement of Hainan’s conversion into a free trade pilot zone, commercial housing transaction volumes had seen a surge over the past several years, rising from 93.5 billion yuan in 2014 to 271.3 billion yuan last year.
Beijing has signalled its backing for the measures, with Yan Pengcheng (严鹏程), spokesperson for the National Development and Reform Commission, telling reporters on 18 April that the Chinese government would “earnestly perform key risk prevention work” when it came to the reform and opening of Hainan province.
“We will closely track potential problems during the course of implementation, and firmly prevent speculative behaviour such as speculation in housing or real estate,” said Yan.