As the Chinese saying goes: for every measure from above, there will always be a countermeasure from below.
That may explain why, for many years, despite local governments’ bests effort to cool off the overheating property market in major Chinese cities, resourceful residents have always found a way to beat the system.
One example is the administrative orders limiting the number of homes one family can own, which varying from city to city. In Shanghai, for instance, a person with a hukou, or permanent residency, can buy two properties at most, and those without can only buy one.
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But no matter what the quota is, there has been one glaring loophole: to become eligible for a first-time homebuyer scheme, many couples divorce, which allows the spouse without any property to snap up a new one, before remarrying.
Now the authorities are striking back.
The government in Shanghai, China’s biggest city, where home prices recently set records, has rolled out a new policy to curb the use of sham divorces to cash in on the property market.
According to a directive issued by the Shanghai government, from January 22, the home ownership history of would-be homebuyers who have been divorced for less than three years will be subject to scrutiny.
In practice, this means the newly divorced will not be allocated a home purchase quota and cannot benefit from preferential mortgage rates offered to first-time buyers.
In the past, once someone divorced, the home-ownership and mortgage records from their previous marriage was expunged. Many couples have taken advantage of this rule and resorted to fake divorces so they can buy an extra home.
Over the past two decades, home ownership has become the most important investment for Chinese families, and this trick – and the increase in demand it generated – helped fuel soaring home prices in China.
Shanghai’s latest directive, which includes a number of other measures to stabilise the property market, is in line with the principle advanced several years ago by Chinese President Xi Jinping that “homes are for people to live in, not for speculation”.
In Beijing, people are known to have married and divorced multiple times just to get vehicle licence plates, as the government has strict limits on the number of licence plates it issues to reduce smog and congestion in the Chinese capital.
A driver who needs a plate marries someone who owns one, has it transferred to their name, and the two then divorce. Local police has been cracking down on this illegal trade. It detained 166 people in November.
Amid rapid urbanisation, fake marriages have become a common as a way to cheat the system. Couples, for instance, get more financial compensation than sole owners if the residential building they live in is earmarked for demolition.
Last year, police in Zhejiang province, eastern China, arrested 11 members of an extended family who married and divorced each other 23 times in a fortnight to cash in on an urban renewal project when their village was earmarked for demolition. This entitled 13 more of them to claim a government payout than woud otherwise have been the case.
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