I’m sure many have heard that divorce can be financially devastating for a couple. But in a country that has over a billion people, couples are divorcing like their future retirement plans depend on it. And in a way, it’s true. China is home to some of the most unaffordable real estate in the world. If you think housing in Vancouver is expensive for a middle class family, think about what life must be like for a middle class family living in Beijing (O_o)
In order to curb high housing prices the Communist Party of China announced a new tax on property sales last week. It states that owners who sell their non primary residence have to pay 20% tax on any profit they make. To take advantage of a tax loop hole many couples in the country are getting divorced and taking one property each. This way neither of them will have a second home anymore, and neither of their properties will be subject to the new tax. Registration centers in various Chinese districts are reporting thirty to a hundred percent more divorces than normal. Furthermore, the number of people applying for proof that they are now single has gone up multiple folds.
A 700 sq-ft apartment in a large city goes for about $400,000 USD. But just five years ago the same apartment was only worth about half as much. According to the IMF the average person in China only makes about $6600 USD a year. Imagine if a couple bought a property 5 years ago and can sell it today for a $200,000 profit, wow! If used wisely this windfall could probably fund someone’s entire retirement because relative to income levels that’s the equivalent of someone in Canada or the US winning the lottery! What about any lasting distress or awkwardness for the family after the divorce? Not to worry because The Shanghai Daily mentioned that these same couples were remarrying as soon as one of their homes were sold tax free 🙂 Might be tough for couples with children to explain what a “tax divorce” is to their kids though 😀
Random Useless Fact: