Masters in the art of skirting real estate regulations...
BEIJING — Beijing’s divorce numbers have soared to 39,075 couples so far this year, a whopping 41% increase over the same period last year. A similar trend is happening in Shanghai, where the divorce rate has risen by 39.6%.
Between 2008 and 2011, the divorce rate in these two cities never exceeded 10%. But the data indicate that things began to change in 2012, when both places saw a significant upward trend of 15% and 12.6%, respectively.
Jinyuan (not his real name) has a Beijing household registration permit, whereas his wife has a non-local household registration. They already own two apartments, so they are not entitled a buy a third in Beijing. Earlier this year, Jinyuan and his wife divorced and registered both properties under his wife’s name so that he could buy another property in his name.
Huang Bin (a pseudonym) and his wife, living in Wuhan city, were divorced last month for the same reason. Though they already own two properties, neither is located in a good school district. The couple want to plan ahead, as their 3-year-old son is approaching school age.
Following a real estate agent’s suggestion, the couple got a divorce and separated the ownership of their properties, each taking one. “We are obliged by the government’s policy,” Huang says helplessly. Now Huang can not only buy another flat, but he also gains the advantage of a lower down payment and a preferential interest rate for the mortgage.
Huang says he saw many other couples also faking divorces. “It’s very easy to tell,” he says. “They are the couples who, after the divorce registration, ask how to obtain a Single Status Certificate straight away. Besides, on the certificate they always fill in the column for the certificate use as for buying property.”
Hu Jinghui, vice president of a Beijing real estate company, says it’s difficult to estimate how much fake divorces affect Beijing’s property transactions. “For instance, for the first three quarters of this year, there were over 10,000 Beijing couples faking divorce to buy property,” he says. “But in the same period, Beijing’s total transaction volume was over 200,000 units. The proportion of couples who divorced so as to buy second houses is a mere 5%. It isn’t as important as it is made out to be.”
It’s obvious that what is driving the rise in divorce rates are new property-buying restrictions in Beijing and Shanghai. “From a statistical perspective, it is indeed abnormal this year,” says Li Ziwei, secretary general of the Beijing Marriage and Family Construction Association, confirming the rising divorce rate.
She says that although the divorce rate is bound also to rise from legitimate cases, it is also subject to external economic impacts such as government policy. “For instance, the national policy introduced in March this year — in which it stipulates a 20% income tax for profits made from selling one’s secondary housing — has led to fake divorces to circumvent the tax hit.”
Li also points out that compared with other countries, China’s property price-income ratio shows a prominent contradiction. “The authority indeed needs a policy to curb housing prices,” she says. “But at the same time, we can’t really blame people who divorce for buying houses. It’s a special phenomenon that should be looked at rationally.”
Divorce in China is easy peasy
It is easy to get divorced in China, as this newspaper discovered from Beijing’s Haidian District Civil Affairs Bureau’s Marriage Registry Office. As long as the required identifications and the divorce agreement are brought along, divorce proceedings happen without any delay. And people can apply for the Single Status Certificate as quickly as two days after a divorce.
One anonymous real estate agent says that couples who fake their divorce to buy or sell houses account for about 20-30% of his agency’s business. They tend to be either first-time buyers who want preferential mortgage conditions, couples who to buy a third house, or those trying to circumvent the income tax levy.
In addition to false divorces, sham marriages in China have also affected Beijing’s divorce rate and created a lucrative market. For instance, since people without a Beijing household registration are allowed to buy only one property there, people sometimes marry locals to purchase properties before getting divorced again right afterwards. Last July, one Beijing woman was found to have gotten married and divorced three times with three different men within a period of five months to help these non-locals purchase homes.
The divorce trend is a byproduct of a tightening Chinese-style property control policy. A serious decision even for a fake divorce is, alas, often decided hastily and can lead to potential problems for many marriages. In fact, for certain families the fake divorces have been a self-fulfilling prophecy.
“I have often had to advise couples not to take their marriages for gambling stakes,” says Li Ziwei. Two months ago, Beijing’s Haidian District Court tried a fake divorce case in which the husband refused to remarry his first wife because he planned to marry another new love. Afterwards, the Haidian court issued a warning document of sorts to alert couples about the risks of divorcing to buy property.
“Faking a divorce for buying property matters less still. After all, the couples will remarry again afterwards. What causes a bigger impact is levying a tax for the second property. Not only do divorcing couples sometimes not remarry, but young couples won’t bother to be joined in wedlock. They’ll simply have to cohabitate,” predicts Meng Xiaosu, president of China Real Estate Development Group, about the social changes government policies can provoke.
In the end, whether the Chinese real estate mechanism can lead in the long-term to a healthy lifestyle and family values has yet to be seen.