Jiang Sixian, Vice Governor of Hainan Province, does not believe there will be a real estate bubble as there was in the 1990s. He sees the situation today as being very different.
He said there were four reasons for the 1990s property bubble which no longer existed – loose regulations when the province was set up; some banks’ blind loans and even direct involvement in the market; immature plans for Hainan developments and low national GDP, which led to a demand from across the country for property on the island.
The bubble popped in June 1993 after the central government tightened lending to real estate developers. Developers abandoned many unfinished buildings and left behind $4.4 billion of bad bank loans for development projects.
The Hainan property market picked up in 2007 after 10 years of recovery, especially at the end of 2009.
This time it is different. Chi Fulin, president of the Hainan-based China Institute for Reform and Development, said, "In the 1990s, most buildings were for offices and bought by enterprises, but now most are tailor-made for individuals and used as second homes."
The boom in Hainan property is part of a near country-wide housing hike since the government introduced a $58 billion economic stimulus in late 2008.
Shanghai Daily reported that last month, the State Assets Supervision and Administration Commission told major state-owned enterprises whose core business is not real estate to quit the market.