(Yicai) Oct. 16 -- Hainan province’s real estate market is gaining momentum ahead of the customs close-off in December, when China’s southernmost province will begin island-wide independent customs operations under the Hainan Free Trade Port and roll out a raft of tax incentives and preferential policies to spur trade and investment.

During the recent eight-day National Day and Mid-Autumn Festival holidays, despite being hit by a typhoon, major cities such as Haikou and Sanya received a large number of visits from house hunters. Several housing projects recorded more than 100 groups of visitors and one development in the tourist hotspot of Sanya reportedly received over 800 groups.

Phrases normally seen during boom times, such as ‘sold-out,’ ‘price hikes,’ ‘projects selling out within two to three days of launch,’ have started to appear in descriptions of the Hainan property market.

The floor area of new home sales surged 22 percent from Oct. 1 to Oct. 7 year on year, while the sales value more than doubled, soaring 115 percent, according to data from the Hainan Department of Housing and Urban-Rural Development.

During the holiday, sales of the province’s top 15 housing projects climbed more than 9 percent from the year before to CNY1.2 billion (USD177.2 million), according to Jincheng Consulting. Of these, Sanya accounted for 47 percent of all transactions, while Haikou made up 40 percent.

In fact, signs of recovery were already visible before the break. In the first eight months, the total area of commercial housing sold in the province edged up 0.6 percent from a year earlier, while the sales value jumped 9.3 percent, according to data from the Hainan Provincial Bureau of Statistics. Of this, the value of residential sales surged 17 percent.

One of the biggest factors driving the fast rebound in Hainan's real estate market compared with other provinces is the upcoming ‘customs close-off’ of the Hainan Free Trade Port, scheduled for the middle of December.

After the close-off, Hainan will roll out more relaxed tariff policies, as well as value-added duty-free policies for businesses in encouraged industries, preferential corporate income tax rates for firms with substantial operations on the island and lower personal income tax rates for high-end and in-demand professionals. The new rules will also make cross-border capital and talent flows easier.

New Growth Phase

Hainan's economic pillars have long been tourism, real estate and tropical agriculture, according to a report by think tank China Real Estate Information Corp. With the full implementation of Free Trade Port policies after the close-off, more industries are expected to enter a new phase of growth, which could, in turn, boost demand for property.

The institutional benefits brought by the Free Trade Port will enhance the long-term value and investment appeal of Hainan real estate, forming a solid foundation for the local property market, Wang Lu, vice president and secretary-general of the Hainan Provincial Real Estate Association, told Yicai.

The impact of the close-off on the housing market will be gradual rather than immediate, Wang said. As a result, market performance will probably remain uneven across the island.

In the provincial capital of Haikou, most homebuyers are locals. Only projects in prime locations tend to attract outside buyers and sell well. Those in less desirable areas struggle to attract buyers even if prices are reduced, the person in charge of the Hainan market at one of China’s top 10 developers said.

However, in tourist hotspot Sanya, where more than 90 percent of homebuyers come from outside the province and have strong purchasing power, customers will not hesitate to pay once they find a property they like. This has given Sanya’s real estate market a bigger boost than other cities, she said.

Editors: Tang Shihua, Kim Taylor