Fake Divorces and Housing Bubbles

The Shanghai skyline along Suzhou Creek. Flickr/<a href="http://www.flickr.com/photos/2_dogs/35576690/">2 dogs</a>

Fight disinformation: Sign up for the free Mother Jones Daily newsletter and follow the news that matters.


The latest sign that China is in the midst of a raging housing bubble: Chinese couples are intentionally divorcing each other to dodge the country’s strict second-home ownership rules and save some yuan in the process. China’s autocratic government, China Daily reports, has sought to curb rampant property speculation (sound familiar?) by hiking the down payment costs and interest rates for married couples looking to buy a second house—in April, the government raised the minimum down payment for families to 50 percent of the home’s value (up from 40 percent) and made mortgage interest rates for married couples at least 1.1 percent of the standard rate.

To avoid those new rules, perfectly happy husbands and wives are now entering into “fake” divorces in order to boost their property portfolios. “After we get divorced, my wife will claim our house, so that I can apply for a mortgage as a first-home buyer since I don’t have a house under my name,” 41-year-old Li Guoliang said. “And we will remarry after that.”

Here’s more from the story:

Li and his wife are among many couples planning on getting a divorce to circumvent the government’s restrictions on second-home purchases.

“Such a ‘fake’ divorce may save the second-home buyer hundreds of thousands of yuan. So, why not do it?” said Chen Ping, a real estate agent in Changsha.

Chen said he had helped many couples apply for the preferential mortgage for the first-home buyer through a “fake divorce,” which was “legitimate and viable, just like reasonable tax avoidance.”

“In the two weeks after the new rules were introduced, I received 16 clients hoping to get a favorable loan by getting a divorce,” said Li Yi, a lawyer with Tenghui Law Office in Chongqing Municipality.

In China, though, divorce for economics’ sake contradicts the traditional Chinese view of marriage, and a poll by Chongqing Evening News in early May suggests the idea isn’t that popular: 78 percent of people polled said they didn’t support “fake” marriages to cash in on cheap housing rules. Still, consider fake divorces alongside the other signs of excess and speculation characteristic of a housing bubble. When you look at the small but telling details—the luxurious Shanghai condos with bronze doors inlaid with Swarovski crystals, the crocodile skin-wrapped bed posts—and the big picture statistics, too—an 80 percent spike in real estate sales between 2008 and 2009, an investor buying 54 apartments in a single day—China starts to like the next US circa 2004, except on a far, far larger scale.

AN IMPORTANT UPDATE

We’re falling behind our online fundraising goals and we can’t sustain coming up short on donations month after month. Perhaps you’ve heard? It is impossibly hard in the news business right now, with layoffs intensifying and fancy new startups and funding going kaput.

The crisis facing journalism and democracy isn’t going away anytime soon. And neither is Mother Jones, our readers, or our unique way of doing in-depth reporting that exists to bring about change.

Which is exactly why, despite the challenges we face, we just took a big gulp and joined forces with the Center for Investigative Reporting, a team of ace journalists who create the amazing podcast and public radio show Reveal.

If you can part with even just a few bucks, please help us pick up the pace of donations. We simply can’t afford to keep falling behind on our fundraising targets month after month.

Editor-in-Chief Clara Jeffery said it well to our team recently, and that team 100 percent includes readers like you who make it all possible: “This is a year to prove that we can pull off this merger, grow our audiences and impact, attract more funding and keep growing. More broadly, it’s a year when the very future of both journalism and democracy is on the line. We have to go for every important story, every reader/listener/viewer, and leave it all on the field. I’m very proud of all the hard work that’s gotten us to this moment, and confident that we can meet it.”

Let’s do this. If you can right now, please support Mother Jones and investigative journalism with an urgently needed donation today.

payment methods

AN IMPORTANT UPDATE

We’re falling behind our online fundraising goals and we can’t sustain coming up short on donations month after month. Perhaps you’ve heard? It is impossibly hard in the news business right now, with layoffs intensifying and fancy new startups and funding going kaput.

The crisis facing journalism and democracy isn’t going away anytime soon. And neither is Mother Jones, our readers, or our unique way of doing in-depth reporting that exists to bring about change.

Which is exactly why, despite the challenges we face, we just took a big gulp and joined forces with the Center for Investigative Reporting, a team of ace journalists who create the amazing podcast and public radio show Reveal.

If you can part with even just a few bucks, please help us pick up the pace of donations. We simply can’t afford to keep falling behind on our fundraising targets month after month.

Editor-in-Chief Clara Jeffery said it well to our team recently, and that team 100 percent includes readers like you who make it all possible: “This is a year to prove that we can pull off this merger, grow our audiences and impact, attract more funding and keep growing. More broadly, it’s a year when the very future of both journalism and democracy is on the line. We have to go for every important story, every reader/listener/viewer, and leave it all on the field. I’m very proud of all the hard work that’s gotten us to this moment, and confident that we can meet it.”

Let’s do this. If you can right now, please support Mother Jones and investigative journalism with an urgently needed donation today.

payment methods

We Recommend

Latest

Sign up for our free newsletter

Subscribe to the Mother Jones Daily to have our top stories delivered directly to your inbox.

Get our award-winning magazine

Save big on a full year of investigations, ideas, and insights.

Subscribe

Support our journalism

Help Mother Jones' reporters dig deep with a tax-deductible donation.

Donate