Earlier this year, Mr and Mrs Cai, a couple from Shanghai, decided to end their marriage. The rationale was not irreconcilable differences; rather, it was a property-market bubble.
The pair, who operate a clothing shop, wanted to buy an apartment for 3.6 million yuan (US$532,583), adding to three places they already own, but the local government had begun, among other measures, to limit purchases by existing property holders. So in February, the couple divorced.
“Why would we worry about divorce? We’ve been married for so long,” said the husband, who requested that the couple’s full names not be used to avoid potential legal trouble. “If we don’t buy this apartment, we’ll miss the chance to get rich.”
China’s rising property prices this year have been inspiring such desperate measures, as frenzied buyers are seeking to act before further regulatory curbs are imposed.
While the latest figures out on Friday last week showed easing in some of the hottest cities such as Beijing and Shanghai, the cost of new homes surged by the most in seven years last month.
On the whole, the real-estate market “apparently cooled” this month following targeted measures rolled out in first-tier and some second-tier cities, the Chinese National Bureau of Statistics said in a statement.
Local governments in at least 21 cities have been introducing property curbs, such as requiring larger down-payments and limiting purchases of multiple dwellings in a bid to cool prices.
The impact of the curbs might be short-lived as regulators have shown no signs of tightening on the monetary front, analysts from UBS Group AG and Bank of Communications Co said.
In the first three quarters of this year, according to data compiled by Bloomberg, average prices for new homes rose 30 percent in tier-one cities such as Shanghai and 13 percent in smaller, tier-two cities.
The boom traces back to 2014, when the People’s Bank of China began easing lending requirements and cutting interest rates. The Chinese Securities Regulatory Commission also lifted restrictions on bond and stock sales by developers, helping them raise money for new projects.
Soon, properties were selling for ever-larger sums in government land auctions. By June this year, China’s 196 listed developers had incurred 3 trillion yuan in debt, up from 1.3 trillion three years before.
In many cities, the price per square meter for undeveloped land has risen higher than for existing apartments on a comparable plot next door, a situation the Chinese describe as “flour more expensive than bread.”
Officials have been trying to end the exuberance without harming the economy, a task made more difficult by the property fever’s uneven spread.
Many smaller municipalities rely on property sales to plug holes in their budgets, giving them an incentive to increase the supply of land that can be developed.
Some cities, including Shenzhen and Nanjing, have also tightened the divorce loophole.
There is some risk that such measures will succeed too well.
A Sept. 28 report by Deutsche Bank AG estimated that a 10 percent decline in house prices nationwide would lead to 243 billion yuan in losses for developers.
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