The unexpected result of China’s new policy to curb property price: Higher divorce rate

Alia | March 5th, 2013 - 6:06 am

On March 1, China’s State Council unveiled a set of policies designed to cool down the country’s housing market. One of the new rules slapped a compulsory 20% income tax on home sellers. The new policies were met with a lot of skepticism and criticism, most of which speculated that they will further drive up housing prices in China.

Another thing, and probably the most unexpected thing, that the new policies are also likely to drive up is China’s divorce rate. Why? Because a fake divorce can potentially save a family the 20% income tax on property sales.

Only one day after the new rules were announced, the following strategy to avoid the tax started to be widely circulated on the Chinese Internet:

  1. The seller couple files for divorce. The seller husband gets the house that the couple intends to sell.
  2. The buyer couple files for divorce. The buyer husband gets the house that the couple owns.
  3. The seller husband marries the buyer wife. Now the house (that the seller family intends to sell and the buyer family intends to buy) becomes a shared property.
  4. The seller husband and the buyer wife file for divorce. The buyer wife gets the house.
  5. Both the seller family and the buyer family re-marry their original spouses.

Three divorces and no property-sale tax! And this is not just another sarcastic joke from cynical Chinese netizens. According to a report by Xian Dai Kuai Bao (a Nanjing newspaper under Xinhua News), 294 couples filed for divorce in Nanjing on March 4, more than twice as many as the usual number.

Director Xia at the marriage registry in Gulou District, Nanjing,  thus told the journalists: “The couples [who are filing for divorce] seemed to be in a rush, urging the staff to be faster. Some of them were very candid. They said that they wanted a divorce only because of house.”

Xia said that many couples asked for paper work to prove their “legally single” status immediately after they registered for a divorce. The move, to Xia, is apparently for house sales/purchase.

In 2013, vows at a Chinese wedding should read like this:

“- Would you take this woman to be your wife? Love her and cherish her, no matter poor or rich, in sickness or in health, as long as you both shall live. Never part with her and be loyal to her even if the two of you have to divorce, marry others and re-unite for the purchase of a second-handed house.

- Yes, I do.”

Faced with overwhelming questions and criticism, Jiang Weixin, Minister of China’s Ministry of Housing and Urban-Rural Development, responded: “The policies have just been released. Let’s give it a try for now.”

Buyers rushed to snap out houses outside the Nanjing Real Estate Trading Center today







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2 Responses to “The unexpected result of China’s new policy to curb property price: Higher divorce rate”

  1. China Newz says:

    Yes, divorce seems to be the smartest real estate option these days in China. This loophole will need to be cracked down on. My guess is that Xi will bring down the hammer on this.

  2. [...] unexpected result of China’s new policy to curb property price: Higher divorce rate, OffBeat China, March 5, 2013. (accessed 6 March [...]

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