Hainan, China's southernmost island province long billed as Asia's Hawaii, announced Sunday night to impose a province-wide restriction on property sales, just a week after receiving a package of favorable policies from the central government to be recast into a free-trade port and international tourist destination. Although the tightening of sales limitations is believed by some analysts to be a transitory step to curb the surging home prices, the official Xinhua News Agency cited authoritative sources as saying there is a big chance the restrictions are here to stay, to prevent Hainan's grand development plan and economy to be once again compromised by real estate bubbles.

Over the past weeks, it's widely reported by domestic and international media that the central government has worked out a raft of policies to boost the development of tourism, duty-free shopping and recreation industries including horse-racing and physical lottery in the province, which are banned elsewhere in the country.

According to Xinhua, since then, home buyers have rushed to snatch up properties in even upstate counties of the tropical province. “One customer came to make a full payment and then left for airport, even leaving behind his purchase contract,” a sales agent told Xinhua, noting many buyers had made deals without proper consideration, worrying they may lose the chance to grab an apartment here.

The current round of price inflation in Hainan's real estate market started from the end of 2016 and now, some areas have seen home prices double and even triple. Some industry insiders said the local government had rolled out more than 10 regulatory measures over the past year to prevent the reoccurrence of the nightmarish real estate bust of the 1990s, which is also known to be China's first case of property bubble, Xinhua reported.

With the 'all-inclusive' restrictions becoming effective from April 22nd, non-local people would not be allowed to purchase homes unless they have got a family member who has been a local taxpayer for at least two years. Besides, the new limitation on home purchase also requires home buyers with Hainan homes under their names to hold the properties for no less than five years.

“This means non-local people could no longer buy homes,” said Wang Yiwu, the president of the Hainan Modern Management Institute, adding it's also bad news for local home owners considering if the limitation remains in place, it'll be difficult for them to find eligible buyers.

The new restrictions are intended to ensure the province has enough land for the infrastructure and industrial development of the pilot free-trade zone, and for local people's housing needs. Meanwhile, land supplies earmarked for commercial residential use will be slashed and gradually cut off.

Hainan's economic data in Q1 indicated that investment in real estate development still occupied 48.1 percent of the overall fixed asset investment, which promptly raised concerns that the purchase restriction would affect the province's economy. An authoritative source was cited by Xinhua as saying that “although the economy may be affected in the short-term, it's worthwhile to give it a try.” He urged the province to be determined in transforming and upgrading its economy in case it'll get too dependent on the real estate sector.

Yan Yuejin, the research director of E-house China R&D Institute, said the roadmap for Hainan's development is quite clear-cut, with all industries involved in constructing a free-trade port being guaranteed a big boost while residential projects targeting outside buyers would go through strict reviews.

Hainan, which in the past had an obscure position, is set to be upgraded into a strategic outpost in China's future opening-up. The plan, according to multiple Chinese media sources, is to back the island with new policies for it to attract more foreign tourists and investors. The new blueprint is also believed to be able to benefit the now embattled HNA Group Co, the biggest conglomerate in the province which is under financial pressure after acquiring a series of trophy assets across the world.

China's President Xi Jinping first unveiled the grand plan for Hainan in mid-April when he attended an event in Haikou, its provincial capital, to mark the 30th anniversary of the establishment of the Hainan special economic zone. He pledged on that occasion to transform the province, which has long trailed other more successful economic zones like Shenzhen, into the world's largest free-trade port that may challenge Hong Kong and Singapore.

Only a couple of days after Xi's speech, China's State Immigration Authority announced to grant visitors from 59 countries visa-free entry to the island for stays of up to 30 days, in an unprecedented move to spur the island's economy and tourism.

The across-the-board home purchase restriction in Hainan also reminds people of similar moves taken by China's central government in the Xiong'an New Area, a new economic zone designated in 2017 near Beijing where real estate transactions are not allowed at all. Xiong'an in North China and Hainan in the south are both perceived to be of strategic importance in the country's deepening of the reform and opening-up.

Chen Shen, president of the China Real Estate Data Academy, told the Shanghai Securities News that real estate in the two zones is regarded (by the government) as a “supporting industry” for a higher quality economy.

According to Chen, Xiong'an has made “high-quality economic development” its top priority, while intending not to rely on land revenue unlike many other local governments in the country. “There will be no land earmarked for commercial residential buildings, and no sales of homes will be allowed. Instead, public rental housing and low-rent apartments would fit in to support the vibrant city.”

As far as Hainan is concerned, Chen emphasized the province's real estate sector has gone through several rounds of price inflations since the 1990s, none of which helped the economy.