Second homes in Hainan (I): reducing dependency.

As noted in a previous post, the second home phenomenon in China is quite different from the one in Western countries. Most of them are not exactly holiday homes, but are bought for other purposes. On exception may be Hainan: the southern island is presented as a major tourist destination and so the island has attracted thousands of Mainlanders who wish to spend a few weeks per year under the sun. But second home acquisitions in Hainan are also motivated by speculation. Per consequence, this phenomenon needs be carefully scrutinized by local authorities, and more actions should be taken to reduce the local dependency to the real estate sector.

In the past, in the early years of reforms, Hainan was doomed by real estate speculation and this partly caused the economic turmoil the island experienced in the late 90’s.

Since then, the island has been recovering thanks to the development of tourism.  With tourism and the rising of Chinese middle-class, second homes have appeared in Hainan. According to Wang Xiaoxiaà in in 2006, 25,000 second homes could be found Haikou1.

In 2010 was launched an ambitious plan to transform Hainan into an international destination by 2020. This decision boosted the housing sector on the island, but for fear of overheating, the local government limited the number of acquisitions one may purchased in Hainan. In spite of these measures, the island experienced a strong increase of real estate prices, and Sanya, Hainan’s main resort city, has become the 5th most expensive Chinese city.

For the local authorities, real estate and construction have gradually become their main financial resources. For the first semester 2014, more than one third of the provincial GDP was produced by real estate, this figure reached nearly three-fourths in Sanya2.

This causes the whole economy of Hainan to be very dependent on real estate.  And the bad news is that real estate in Hainan is very volatile and speculative. Most real estate programmes do not answer local housing demands but target wealthy Mainlanders, and since the beginning of this year, sales have started to drop.

This should drive the local government of Hainan to reconsider its strategy and diversify the island’s economic activities.

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I have studied this aspect of the development of tourism in Hainan in my Ph.D. dissertation entitled “Les politiques de développement regional d’une zone périphérique chinoise, le cas de la province de Hainan (Regional development policies in a Chinese peripheral region: the case of Hainan province). This dissertation was defended on December, 18, 2014, and will soon be available online.

  1. WANG Xiaoxiao (2006), The second home phenomenon in Haikou, Master thesis, University of Waterloo, Canada. Retreived December 20, 2015 from http://etd.uwaterloo.ca/etd/x42wang2006.pdf []
  2. DOI, Noriyuki (2014), ‘Chinese housing prices still sliding’, Nikkei Asian review, August, 24. Retreived September 20, 2014 from http://asia.nikkei.com/Politics-Economy/Economy/Chinese-housing-prices-still-sliding []

Sebastien Goulard

Ph.D. in political science (EHESS, Paris); M.A. in social sciences (EHESS, Paris); M.A. in international relations (IRIS, Paris), B.A. (Hons) in international political studies (ESE - Nottingham Trent University)

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