Buying a slice of Chinese paradise
The seaside city of Sanya on Hainan Island is frequently referred to as China’s Hawaii due to its balmy year-round weather. And it’s a great location for a holiday home, as it’s only an hour’s flight from Hong Kong, says Lucy Davis
"Given such an extended peak season, rental returns can be long and lucrative, and the housing market remains buoyant, following the introduction last month of several China-wide stimulus measures"
Situated on the southernmost tip of Hainan, China’s only tropical island, Sanya has seen an explosion in tourism over the last few years, with over five million holiday makers visiting the resort town in 2007. More than half a million of these visitors were international tourists, representing a year-on-year increase of 34 percent.
Keen to attract the patronage of China’s newly minted millionaires and to cater to the increasing number of non-Chinese tourists, luxury hotels such as the Ritz-Carlton and the Banyan Tree have recently sprung up along Sanya’s expansive palm-dotted shores, and the Mandarin Oriental will open for business here early next year.
Boasting 300 days of sun a year and an average annual temperature of 26°C, Sanya is a popular and easily accessible holiday destination with those living in Hong Kong and the southern Chinese provinces, but it also attracts Russians, Koreans, Taiwanese and Japanese holiday makers in search of sun, sand and sea. Thanks to its tropical climate - it shares the same latitude as Hawaii - Sanya attracts visitors year-round, but is particularly busy from the months of October to May.
Given such an extended peak season, rental returns can be long and lucrative, and the housing market remains buoyant, following the introduction last month of several China-wide stimulus measures.
While sales in the Shanghai market rebounded 30.38 percent in November on a weekly basis, and turnover in Beijing jumped 79.44 percent, prices surged 8.1 percent in Sanya.
Sanya has three main beaches, Yalong, Dadonghai and Sanya Bay, with the former offering uninterrupted views out over the South China Sea. As a result, Yalong is one of the most expensive places to buy property in the area.
Confirms Clement Leung, Executive Director, China Valuation, Knight Frank, “Yalong is Sanya’s most developed bay, as it has the best beach, and it is also the site of most of the luxury hotels. Currently, medium-rise buildings in Yalong are selling for around HK$5,000 per square foot, whereas villas are fetching between HK$6,000 per square foot and HK$7,000 per square foot.”
Pricing is similar at Dadonghai, also the site of a pleasant beach and more lively than Yalong, with plenty of beachside dining options. “Prices here start at HK$3,500 per square foot for a medium-rise property, but villas around here, and within the city, start at HK$8,000 per square foot and HK$9,000 per square foot,” says Leung.
Yalong may have the best beach, but Dadonghai has convenience on its side. Being closer to Sanya city and the airport, transfer time is less than half an hour, whereas getting out to Yalong can take up to 45 minutes. That said, Leung believes that the safer investment at the moment is Yalong. “Many of the residential properties located in this bay are managed by the hotels, and they can offer annual gross returns of around 7 percent to 8 percent,” he says.
If you’re looking for something cheaper, Leung notes that there are plenty of high-rise developments to invest in along the coastal road from the airport heading out west towards Yalong Bay. These properties are going for less than HK$3,000 per square foot. Looking to the future, Leung also suggests that investors keep an eye on the bays on the outskirts of Sanya, such as Qingshui Bay on the east coast. Chinese developers Agile Property Holdings and Greentown Real Estate plan to build resort villas and luxury apartments here, as well as a hot spring resort, three golf courses and a yacht club.
Sanya homeowner Mario Cavolo, who runs local website www.sanyaexpat.com, which contains a host of useful information on buying property in the area, was the first foreigner granted a mortgage to buy a property in Hainan province. Cavolo bought an 800 square-foot beachfront apartment at Dadonghai’s Lan Hai Hao Yuan development in 2003 for a mere HK$585 per square foot. “Typically you’re buying ‘on spec’ while the complex is still being built,” says Cavolo. “I put down a RMB10,000 (HK$11,358) deposit and when the apartments were up for sale, they gave me my choice of the units still left. One year later when the building was finished I did the final closing papers and fees and received my key.”
However, Cavolo warns prospective buyers that they should be aware of the tax implications of buying in China. “Standard closing taxes and fees total around 7 percent. But on second-hand properties, you have a five-year capital gains tax in China. The rate is highest here in Sanya for oceanfront properties which are considered premium locations. That tax easily adds up to an additional 15 percent. So for example, if you sell your second-hand apartment for HK$1.7 million, you can expect to pay around an additional 20 percent to 25 percent in taxes, taking the total to over HK$2 million.”
Echoing Leung’s pricing estimations, Cavolo adds that a brand-new apartment at Ban Shan Ban Dao on the Lui Hui Tou Peninsula - adjacent to a new golf course and the Banyan Tree resort and near to Dadonghai – recently sold for HK$8,500 per square foot. Second-hand apartments, meanwhile, have a more moderate market price of HK$5,000 per square foot to HK$7,000 per square foot. “This is about 20 percent to 25 percent lower than the new properties, keeping in mind again that there are more taxes to be paid upon sale,” he warns.
On the subject of rental, Cavolo says, “Long-term rental rates at the major oceanfront properties at Dadonghai run from HK$14 per square foot per month to HK$21 per square foot per month. For example, a 1,400 square-foot apartment will rent out on a long-term one year lease for HK$5,685 per month to HK$6,822 per month. Smaller one- or two-bedroom units are running at HK$3,400 per month to HK$4,500 per month.” Target renters are hotel management expats coming to Sanya on employment contracts, Cavolo adds.
Phoenix Island, a RMB$10 billion development that is being marketed as Hainan’s answer to Dubai’s man-made Palm Island, is also generating much excitement around Sanya’s azure shores. While not due for completion until 2010, Hong Kong investors will be able to purchase luxury apartments by the end of the year via the Sanya Phoenix Island Development. The units will range from 538 square foot to 2,152 square foot, and while prices have not yet been finalised, developers are hopeful they will sell for as much as HK$17,000 per square foot. Built on a reef in Sanya Bay, the development will have its own theme park, cruise terminal, shopping complex and luxury hotel.
So why should you buy in Sanya? “If you want to live in or have a holiday home at a classic tropical beach destination with beautiful beaches, then Sanya is for you,” asserts Cavolo. However, he stresses that “Sanya is not a big modern city - it is very similar to other tropical destinations with very simple local economies such as you find in the Caribbean, the Philippines and Mexico. It compares to places like Cancun or Cabo San Lucas, which saw a combined government and tourism industry commitment to build an infrastructure.” In Sanya, then, the draw is famous five-star hotels, golf courses and other tourist attractions, as well as residential apartments.
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