A vast majority of Chinese couples are rushing to the marriage bureaus to divorce each other in order to evade a stringent property tax that local governments are now imposing to curb the red-hot property bubble in the country.
Recently, the Chinese government announced new property rules in March that included a 20 percent capital gains tax on property sale profits. Down payments and mortgage interest rates were also increased.
In Beijing, unmarried people will now be allowed to purchase only one house. The 20 percent capital gains tax and increased down payments are the other rules. Couples who purchase a second home will have to pay 60 percent tax on the property's value as well. An identical capital gains rule applies in Shanghai too. In addition to that, the city prohibits banks from giving credit to third-home buyers.
Following the tax impositions, couples owning two residences are rushing to separate so that they can write off each property in their individual names and evade a giant tax payment on the sale of the home. Similarly, if they are divorced, they can also buy another property, dodging the tax.
In Shanghai, 53 divorces were registered in a single day. The conditions were similar in other Chinese cities like Nanjing, Ningbo and Wuhan as well. The most common reasons given for the divorce were "adultery" or "domestic violence" and "lack of mutual affection". Now, the women are also failing to provide authentic proof of their husband's misconduct.
"In one case, the wife caught her husband having an affair, but this made her so emotional that she forgot to keep any evidence or records. Although she provided voice messages and online chat text messages between her husband and his mistress, they were regarded as low credibility evidence by the court," Marilyn Stowe quoted the Intermediate People's Court of China in her blog.
However, registries are advising the couples to come back and remarry. According to the Shanghai Daily, a registry official said that a pregnant woman had come in to get a divorce.
"She told me she came here to avoid the possible loss in a property transaction, and I could say nothing," the official told the newspaper.
"I told all of them to come here again for remarriage registration," the official added.
The rising rate of divorces asserts the importance of asset investment in China. However, the real estate market of the country is inflating by the minute.
More local governments are tightening property policies now to avoid an asset bubble. Around 17 other cities have announced property curbs as well, which will take effect by the end of the first quarter. While some experts believe that the aggressive nationwide curbs will weaken home sales in the coming months, others believe that the fundamental demand will remain unchanged and that the regulations will only work to solve short-term problems.