Lack of investment options creates bubbles in property market
Amid rising real estate prices across China, Chinese couples are scrambling to get divorced to buy new houses, in an effort to circumvent government restrictions that require residents to pay more in down payment if they want to purchase a second house.
"We already have two apartments but if we do not buy a third one, our housing accumulation fund would be wasted. Besides, real estate is a good investment option," an anonymous Shanghai resident who is planning to get a "fake divorce" with his wife told the Global Times on Monday.
According to the Shanghai government's current policy, homebuyers must put up to 50 percent down for their second house and 70 percent for a third one. A first-time homebuyer only needs to put down 30 percent.
Meanwhile, a rumor, which was denied by the authorities, has been circulating in the city that the restrictions may also be applied to those who have been divorced for less than a year.
Of 70 Chinese cities surveyed in August, 64 reported a month-on-month increase in new home prices, the National Bureau of Statistics said on its official website on Monday.
As price hikes extended from top-tier cities to medium-sized cities, three cities - Suzhou, Xiamen and Hangzhou - resumed home purchase restrictions, while several others raised minimum deposits.
In Guangzhou, capital of South China's Guangdong Province, appointments with a divorce official in September were fully booked in less than a week, local newspaper Yangcheng Evening News reported.
"They still live a normal married life. The only thing that is different is what's written on their marriage documents. Some are even expecting their second child," an anonymous Beijing resident who has seen several colleagues getting a "fake divorce" told the Global Times.
"Nowadays, families are using 'fake divorces' as a tool to skirt the home purchase restrictions for different reasons, such as avoiding the home-purchase tax or buying a house in a school district," Lin Nan, a Beijing-based lawyer from Liang Gao Law Firm which specializes in marriage cases, told the Global Times on Monday.
Asset bubble
Currently, housing prices in big cities are registering an abnormal increase, which has actually created a big economic bubble, said Hu Xingdou, a professor at the Beijing Institute of Technology.
"Due to a slowdown in the real economy, many business owners in real economy sectors have dived into real estate, while others have followed them due to the lack of better investment options," Hu said.
The acceleration in price increases came as excessive money supply led to strong investment demand and buyers looked to profit from further price increases in future, Zhang Dawei, an analyst with Centaline Property, was cited as saying by the Xinhua News Agency Monday.
According to a survey from Longview Economics in the US, the average housing price in Shenzhen, Guangdong Province is the second highest in the world. Beijing and Shanghai are also among the most expensive, the China Youth Daily reported on Thursday.
Society has a tendency to worship money, and some people use all means to accumulate wealth, even at the cost of their families, Hu said, adding that the phenomenon reflects the high living cost in China and lack of satisfactory social welfare provisions.
While the courts are unable to distinguish between a real divorce and a fake one, the policy to curb housing prices wasn't intended to lead to such an outcome, Lin said.
Hu said the purchase restrictions could have little effect on preventing the real estate market from overheating.
"More investment choices should be provided to people, which calls for a more regulated capital market," Hu said.
The restrictions should take into account the reasonable needs for home purchases, and media, as well as legal authorities, should speak more about the risks involved in "fake divorces," Lin said.
