Long queues of happy couples waiting to get married might be a common sight in Las Vegas. But lines of happily married couples waiting to get divorced? Only in China.
In major cities across the country last month, thousands of couples
rushed to their local divorce registry office to dissolve their
marriages in order to benefit from fast-expiring tax breaks on property
investments for unmarried individuals. Local media reported long waits
at registries in Beijing, Shanghai, Guangzhou and elsewhere as savvy
investors sought to buy or sell a second home before the government
introduced strict new regulations that would force married homeowners to
pay hefty taxes on the sale of second properties.
The new regulations are designed to cool speculation in China’s
feverish property market and are part of a package of measures that
would require couples to pay up to 20% capital gains tax on the sale of
second homes. But for determined investors, nothing gets in the way of a
good bargain, and some quickly noticed that the 20% impost didn’t apply
if the second home was bought before the couple were married — or after
they got divorced.
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China’s marriage law
allows for divorce if couples simply sign an agreement to divorce,
present themselves at the registry office and pay a fee of just $1.50.
Weighed against the prospect of tens or even hundreds of thousands of
dollars of profit from property investments, many couples are deciding
the $1.50 charge is worth it.
According to media reports, in March the number of couples getting
divorced in Tianjin, a large city on the eastern seaboard, soared to 300
per day — more than triple the normal amount. In Beijing, too, realtors
reported a boom in divorcing couples seeking out new houses. “Half of
the deals I made last month were cases where the couples were getting
divorced,” a Mr. Jin, who works as an agent at one of the biggest
realtors in Beijing, tells TIME. “These were all young couples between
25 and 35 years old, and all of them were looking to buy another house
as an investment.”
As an emerging middle class accumulates wealth, more and more young
families are finding that they have limited options to make good use of
their money. With overseas investment options closed off by complex
regulatory barriers, banks offering measly interest-rate returns on
deposits and the stock markets on a never ending losing streak, there
aren’t many attractive investment choices.
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Some choose to invest in gold and other precious metals. Indeed, when
gold prices fell sharply last week, shops in mainland China and Hong
Kong quickly reported stock shortages and empty shelves. But China’s
savvy purchasers have long had an affinity for putting their money into
bricks and mortar, not least because property prices in most cities have
soared over the past decade and continue to rise sharply.
With a seemingly endless supply of money flowing into the country’s
property sector, and prices on a constant upward trajectory, regulators
have long been worried about the frothy market giving rise to major
property bubbles, especially in the most populous cities like Beijing
and Shanghai. But it seems that canny investors are quick to spot ways
around the cooling measures, hence the new vogue for divorce.
It’s not only profiteers who are choosing the divorce route. Many
couples who simply want to trade up from their current home have
realized that they can save tens of thousands of dollars by splitting up
before making their next purchase. According to media reports, one
couple in the southern city of Guangzhou, who already owned two
apartments, saved $32,000 by getting divorced and selling one of their
houses before buying another.
(MORE: For Love or Real Estate: The Cost of Getting Divorced in China)
The divorce solution is extreme but it’s the kind of solution to
which China’s put-upon middle classes have become accustomed.
Civil-servant couples, for example, are subject to a particularly strict
version of the one-child policy that would require them to give up
their jobs if they had a second child. Some have decided to circumvent
those rules by getting divorced and having a second child out of
wedlock, registered under either parent’s name as a “first” child.
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Of course, the country’s regulators have also taken notice of the
long queues outside divorce registries and have acted to put a stop to
the practice. In recent weeks, the government revised its regulations to
increase the taxes payable by unmarried individuals selling a
secondhand property, effectively cutting the most speculative investors
out of the market.
Others, though, are still happy to break the knot, if only because
they need not stay divorced for long. Realtor Jin advises his clients
who are considering the process that they can be back in happy
matrimonial bliss within as little as three weeks. “If you pay the full
price in cash up front, the whole transaction can be completed in as
little as 10 days — and even if you’re taking out a mortgage, it only
takes about six weeks,” Jin says. “Once that’s done, you can go and get
remarried right away.”
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