The Chinese island of Hainan, Phoenix Island, also dubbed the Dubai of China for its overpriced, snazzy apartments is on a self-destructive path, reported France 24.
The luxury apartments situated on the man-made island has been the center of real estate pride in China. But because of the unsustainable and expensive developments and global economic slump, profits have declined.
It's very unfortunate since a seven-star hotel project has already started construction on the island. The Hainan province's tourism authority was titling the development the "eight wonder of the modern world," reported France 24.
Owners of the luxury apartments and developments were immediately unloading properties following the global market's crisis and therefore trying to get returns from business loans, according to real estate agents in an interview with the station.
The apartments at the peak value, cost 150,000 yuan per square meter, or roughly $2,200 per square foot. The property only cost 70 yuan in 2010.
"I just got a call from a businessman desperate to sell," said Sun Zhe, a local real estate agent, in an interview with Agence France-Presse, AFP. "Whether it's toys or clothes, the export market is bad... property owners need capital quickly, and want to sell their apartments right away. They are really feeling the effect of the financial crisis."
According to AFP, the Chinese business owners used property as their next avenue to invest and get high returns by pushing prices to the limit, and unfortunately their idea imploded.
"China had a lending boom," said Patrick Chanovec, a professor at Tsinghua University in Beijing, in an interview with AFP, "so if people are using property as a place to stash their cash, they had more cash to stash."
"At some point they want to get their money out, then you find out if there are really people who are willing to pay those high prices," Chanovec added.
Buyers came in by the barrel in 2008 when they increased property prices. The Washington Post reported this could be dangerous for China since real estate is 14 percent of the country's GDP, in addition the AFP reported the country's authorities and policy handlers want to especially avoid the burst of a real estate bubble.
