Lunacy Prevails: September 2009 Sanya Real Estate Review, SanyaExpat Founder Mario Cavolo Declares a Property Market Bubble in Sanya, Hainan Island

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Sanya, Hainan Island is China's only true tropical paradise destination with all major international resort and property developers clamoring to her beaches. However, according to Mr. Cavolo, "It seems quite clear little more than Macau style gambling and speculative "appreciation expectation" is driving property market prices to comparatively unreasonable and risky levels in Sanya with outrageous discrepancies, similar to the 100% rise we have seen in the Shanghai stock market."

is driving property market prices to comparatively unreasonable and risky levels in Sanya, similar to the 100% rise we have seen in the Shanghai stock market.

Sanya, Hainan Island, China - "Lunacy prevails in the Sanya property market, a dangerous bubble that has gone too high too quickly" says Mario Cavolo, founder of SanyaExpat. (http://www.sanyaexpat.com)

Sanya has been quickly identified as China's only true tropical paradise destination, however, according Mr. Cavolo, "It seems quite clear little more than Macau style gambling and speculative "appreciation expectation" is driving property market prices to comparatively unreasonable and risky levels in Sanya, similar to the 100% rise we have seen in the Shanghai stock market."

Mr. Cavolo, a professional speaker and media presenter also based in Shanghai for 10 years (http://www.mariocavolo.com), arrived in Sanya five years earlier just before the current resort and property boom took hold and was the first foreigner on Hainan Island to obtain a mortgage from the Bank of China.

Mr. Cavolo's just published 3rd Quarter 2009 Sanya Real Estate Review presents the case of the Serenity Coast / Ban Shan Ban Dao development, managed by CB Richard Ellis, neighboring Sanya's Banyan Tree and soon to be opened Intercontinental Resort at the Lu Hui Tou peninsula of Sanya.

This high-profile luxury development is currently sporting average prices of 28 - 30,000rmb per square meter for the Phase III, 110 square meter two-bedroom apartments. However, Mr. Cavolo's report points to huge discrepancies between prices on offer on the primary and secondary market at the development. "This phenomenon, which is also found at other developments in the city, points to a need for extreme caution before buying at these current price levels." Mr Cavolo said.

Right now, average prices at Ban Shan Ban Dao, set by the seller, have moved up 250% from 12,000rmb per square meter for Phase I sales two years ago to the current 26,000-30,000rmb per square meter price for Phase III.

"So then why is there a unit for sale by owner in Phase I, equally decorated, and only 100 yards across the road asking just 13,000rmb per square meter which is the same price it was purchased at two years ago? What does this tell us?" asks Cavolo. "At the same price of two years ago, we can suspect the seller is highly motivated. Yet even taking that possibility into account, we still have a huge discrepancy in the true market price."

While recognizing that government stimulus, low interest rates and aggressive bank lending accompany and support such asset bubbles as this, we need to be even more cautious before blindly following the speculative "appreciation expectation" crowd. Just as the Shanghai market saw a sharp 25% decline in August, the real estate market in many parts of China, in particular Sanya are at those dangerous peak levels more subject to sudden price movements and volatility, says Cavolo.

Celebrating 10 years based in Sanya & Shanghai, Mario Cavolo is the founder of SanyaExpat, the only publisher of Sanya Quarterly Real Estate Reviews. As a professional speaker and media presenter for over 20 years, he is also the go to guy for a diverse corporate client base in the Asia Pacific Region, including hosting corporate events for American Airlines, marketing/PR videos for Kempinski Resorts, executive coaching and workshops for PPG and Deutsche Bank. Other clients include the American Chamber Shanghai, CCTV, Shanghai Tourism Bureau and Mandarin Oriental Hotels. Visit http://www.mariocavolo.com.

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