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China's Tropical Hainan Is All Sand, Sea... and Property Curbs

Residential properties in Sanya, Hainan.

Photographer: Qilai Shen/Bloomberg

China’s tropical island of Hainan is basking in the glow of a raft of favorable economic policies, some unveiled by none other than President Xi Jinping.

But, now, it’s also notable for something else: China’s first province-wide home-buying restrictions, after previous curbs were expanded in an announcement on Sunday. To get a sense of the scale, that’s an area a bit bigger than Belgium. The intent is to curb speculative investors attracted by the policy goodies.

Chinese developers with big exposures to the island -- measured as a percentage of their total gross floor area -- slumped on Monday. Agile Group Holdings Ltd. fell 6 percent.

From Catalyst to Poison

China developers with big Hainan exposure slump on Monday

Source: Macquarie

“The restrictions are more rigorous than expected, and they come with immediate effect,” said Yan Yuejin, a Shanghai-based analyst at property data and consulting firm China Real Estate Information Corp.

The latest curbs include requirements for non-residents or new residents to have two-year work records to make home purchases, according to a statement released by the provincial government on Sunday, which also pointed to a tightening up of land supply. Officials are encouraging builders to put undeveloped residential land to other uses, such as rental homes. A previous round of curbs came three weeks ago.

Property bubbles have previously hit Hainan -- and burst. That because the island has long been a destination for speculative capital and a focus of big government plans. Now, with the latest pledges covering everything from horse racing to a free trade port, local officials seem determined to rein things in.

— With assistance by Emma Dong, and Moxy Ying

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