China’s Real Estate Struggles Deepen, Beijing Allows Home Purchases Through Sham Divorce

Regulation of restricting home purchase for 3 years after divorce
Attempting to encourage purchases by quietly abolishing
China’s January-February new home sales were 12.7% lower than in at the time of the pandemic

China mired in a real estate slump and quietly removed a regulation that banned the purchase of new homes for three years after a sham divorce.

On the 28th (local time), the Chinese economic media, Chai Xin, reported that Beijing City had quietly abolished the policy restricting home purchases at divorce.

According to the report, the Beijing Housing Construction Committee confirmed on its official website the day before that the policy, which had been in effect since August 5, 2021, had lost its written effect.

In 2020 and 2021, when house prices skyrocketed due to a real estate boom, the Beijing, Shenzhen, and Nanjing city governments enacted a policy to limit home purchases at divorce to block additional home purchases through sham divorces.

The goal was to block non-homeowners from buying a home again while maintaining a de facto marriage relationship after a sham divorce. Specifically, even if they divorced, they were banned from buying a new home for three years. This temporarily prevented speculative home buying. In China, sham divorces involve purchasing multiple homes and avoiding real estate surcharges.

Then, as the real estate slump was highlighted as a major cause of the prolonged economic slowdown, led by the defaults of two of China’s largest real estate developers, Hengda (Evergrande) and Biguiyuan (Country Garden), the government has now abolished its policy of restricting home purchases at divorce.

Real estate is important in China, accounting for more than 20% of the gross domestic product (GDP) and 80% of Chinese wealth.

Chai Xin introduced that Beijing city quietly announced the abolition of the policy restricting home purchases at divorce, not in the form of an official announcement, and reported that most major cities in China other than Beijing are lifting the previously implemented home purchase restriction policies.

According to the National Bureau of Statistics of China, the sales of new homes from January to February decreased by 24.8% compared to the same period last year, amounting to 960 billion yuan (approximately $132.8 billion). Even in Beijing, the volume of existing home transactions until the 24th of this month this year was 28,500 houses, a decrease of 27.8% compared to the same period last year and a decrease of 12.7% compared to the same period in 2022, which was the period of the COVID-19 pandemic.