LOOPHOLES

Charted: Divorce rates go up and down with home prices in China’s big cities

Obsession
China's Transition
Obsession
China's Transition

If I told you spending $1 would save you tens of thousands of dollars soon afterwards, would you believe it? What if you had to get a divorce in order to get the savings?

In China, which is experiencing a housing boom, filing a divorce can cost as little as 8 yuan (about $1.20). For married couples who want to buy a second home for investment, faking a divorce enables one of them to no longer own a property on paper. That allows them, as a “first-time” home buyer, to get a much lower down payment thanks to rules designed to curb speculation by demanding higher deposit and interest rates from anyone who already owns a home.

Authorities laid down those rules in some of China’s biggest cities in 2010. But the loophole the rules created, it appears, will soon be closed. Or so say widespread rumors. Fearing the worst, last month dozens of Shanghai couples rushed to local registry offices (paywall) to “split up”—getting their down payment lowered, from about 70% of the home’s value to 30%, while they still can.

Over the past decade, China’s housing market has heated up, cooled off, and then heated up again. While home prices in China’s biggest cities fluctuated, divorce-to-marriage ratios in some cites went up and down accordingly. Nicole Wong, CLSA’s Hong Kong regional head of property research, has charted the correlation in Beijing and the southwestern city of Chongqing.

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