- New 20% capital gains tax on housing sales has unleashed panic buying in China
- Divorce numbers rising; tax does not apply to individual's first property purchase
- Beijing real estate agent: home sales up 20% in the capital
- Most of China's property developers fell max of 10% on Monday in reaction
Wang Ying and Du Bibo were married only a fortnight ago but already they are lining up in the divorce registry office in Shanghai's Xuhui district to dissolve their marriage.
With big smiles on their faces -- a facial expression that marks them out as not your normal warring couple -- they explain that the mortgage officer at their bank recommended divorce as the best way around a new property tax.
A capital gains tax on housing sales was intended to cool China's sizzling property market, but since it was announced last Friday it has had the exact opposite effect: a panic has been unleashed.
Sales have spiked and prices have increased as buyers try to close deals before the 20 per cent tax goes into effect. There has also been a jump in divorces, a practical if rather hard-hearted strategy for exploiting a loophole in the rules.
The frenzy underscores just how central property is to the Chinese economy, with vast amounts of the population's wealth tied up in the value of their homes.
Mr Du already has a property under his name in Beijing and the couple want to buy an apartment in Shanghai where they live, so they will divorce today and remarry after Ms Wang has bought the home in her name -- thereby avoiding the tax, which will not be levied on an individual's first property.
"We only found out about the new law when we went to the bank this morning to apply for the loan, so we rushed here to get divorced," Ms Wang said. "The divorce office staff told us not to say we are getting divorced because of the property law, he said just make up anything else that makes sense so we chose lack of feelings."
The caseload has quadrupled at some divorce registry offices in Shanghai since the tax was announced, according to the state-run Shanghai Daily.
In Beijing, a crowd hoping to complete housing deals before the tax is implemented spilled on to the street at the Chaoyang district property bureau. One woman said that she had paid a man Rmb1,000 to hold her place in line overnight after failing to make it to the front of the queue a day earlier.
Zhang Lin, an office worker, had come to see whether his two properties -- one that he bought and a second that used to belong to his parents -- would be affected.
"This tax will be a big loss of income for ordinary people, and I don't think this will actually stop prices from rising. It just means that more of our money will go to the government," he said.
Similar scenes of people swarming property registration offices have been reported around China this week. In Wuxi, an affluent eastern city, local media said housing sales had increased sevenfold from the daily average before the announcement.
A real estate agent at a Beijing office of Homelink, a nationwide agency, said sales were up about 20 per cent in the capital.
"Before there was always some bargaining. When the asking price was Rmb1m, it could be cut to Rmb950,000. But now there is no bargaining. If buyers don't like the price, sellers will just wait for someone else to come along," he said.
At China's national parliament this week a number of officials have emphasised that details of the tax, including the date it begins, have yet to be worked out.
The share prices of most of China's real estate developers fell by the daily maximum of 10 per cent on Monday because of concerns that the tax will hurt their earnings. The government has struggled for a decade to rein in housing prices, which began to soar again late last year as the economy rebounded.
The steep drop in the stock market and real estate frenzy have fuelled speculation that the government might backpedal on its latest efforts to control prices. But Jiang Weixin, the housing minister, told China Central Television that there was no turning back.
"Like all new policies, we will review their effect after implementing them for a time," he said. "Perhaps we will make them even stricter."
Additional reporting by Yan Zhang