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Visitors look around a miniature of new apartment complex at a showroom in Beijing, Feb. 27, 2013. In Shanghai, marriage registration offices – which also handle divorces – reported a surge of as many as 51 divorces in a single day this week as panicked would-be apartment sellers moved to protect themselves against tax at the cost of their marriage, even if only on paper. (KIM KYUNG-HOON/REUTERS)
Visitors look around a miniature of new apartment complex at a showroom in Beijing, Feb. 27, 2013. In Shanghai, marriage registration offices – which also handle divorces – reported a surge of as many as 51 divorces in a single day this week as panicked would-be apartment sellers moved to protect themselves against tax at the cost of their marriage, even if only on paper. (KIM KYUNG-HOON/REUTERS)

REAL ESTATE

In China, quickie divorce new way to beat taxman Add to ...

After six happy years of marriage and a young son, Xiao Pang admits cheerfully that it’s the taxman who has pushed her to divorce court.

“It’s a little strange, even a little exciting. If it were for real, I probably would not feel like this,” the upbeat 33-year-old said outside the Chaoyang District marriage registry office, after she and her husband filed for a quickie divorce this week.

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Last week, the central government announced it would strictly enforce a 20-per-cent capital gains tax and raise the down payments and mortgage rates for second-time buyers.

The 65-square-metre apartment Ms. Pang and her husband want to buy has already jumped to 2.25 million yuan ($360,000 U.S.), up from about 2 million yuan a month ago. Suddenly they realized they could save thousands if one of them purchases it as a divorced, first-time buyer.

So Ms. Pang (who declined to give her real name for fear tax authorities would track her down) took a break from her work day as an IT specialist to sign the papers. “Many colleagues and friends of mine know about this, and many people are doing this,” she said.

Divorce rates in China are rising, up 7.3 per cent in 2011, but the country’s tough regulations on property ownership seem to be taking their own toll on marriages, as couples take drastic measures to protect what is seen as the most secure method of investment in an otherwise uncertain society.

In Shanghai, marriage registration offices – which also handle divorces – reported a surge of as many as 51 divorces in a single day this week as panicked would-be apartment sellers moved to protect themselves against tax at the cost of their marriage, even if only on paper. Beijing’s civil administration would not provide similar numbers, but Beijing’s divorce rate in last year’s fourth quarter, in which house prices started climbing, jumped 15.75 per cent, year on year.

If they hope to marry, young men must almost certainly own an apartment. And well-off families often acquire another home for aging parents, or as a way to invest for retirement or education. But for the past two years the government has cracked down on multiple property purchases in major cities, to ward off speculators.

In Beijing, only families with a coveted permanent residency permit can own two properties, and the second comes with much higher down payment and mortgage terms; those from outside Beijing are limited to a single property.

Speculation that property controls might be loosened were dashed this week in the National People’s Congress, where outgoing Premier Wen Jiabao urged the government to focus on providing affordable housing and to drive out speculators.

Economists also warn against easing property controls in a still-overheated market. “Despite the policy-induced slowdown in activity, Chinese property remains on a wildly unsustainable path,” Mark Williams, China economist at Capital Economics, wrote in a recent research note.

The government’s broad moves have upset property holders. At the Chaoyang District property office, lineups to register transactions ahead of the new tax were so long that fistfights broke out earlier this week.

“These kinds of policies are not good for people like me who want to move house. As far as people who just speculate and flip houses, they should figure out a way to determine who those people are,” said Wang Yuhao, 34, a software engineer who wanted to register and pay tax on his new apartment before tax bills increased.

He said he wouldn’t consider divorcing his wife, with whom he has a baby daughter, just for the sake of property. But he said the practice is common: “I do know people who have done that. They’re trying to take advantage of the loopholes.”

As for Ms. Pang and her husband, the divorce is simply a practical way to ensure her family’s financial security. “After we get this done and buy a house, we’ll get remarried,” her husband said. “Our country has forced us to do this.”

 

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