The blockchain-based 'open financial and trade ecosystem' for the Guangdong, Hong Kong, and Macau Bay Area will be run from Shenzhen. Photo: iStock

Shenzhen has come up with an unorthodox way to suppress home prices and the original source of the soaring prices – the high divorce rate. Starting this week, the government required couples to make a 70% down payment if they buy a second home during the first two years after a divorce.

The new measures, which people ridiculed online as the toughest in history, are aimed at curbing an emerging trend – couples filing for divorce in order to enjoy a higher quota to buy a first home with only a 30% downpayment.

This was the second revision after 2016 when limits were first introduced for divorced people to buy more properties. Prior to the rule change in 2016, a Shenzhen family could buy up to two apartments with a 30% downpayment. However, many couples filed for divorce so they could own up to four apartments.

The local government then tightened its rules to allow a divorced person to buy only one apartment. But a split family could still own three apartments.

The surge in Shenzhen home prices may have a high correlation to a surge in the divorce rate in the southern Chinese city. Last year, the Ministry of Housing and Urban-Rural Development in Shenzhen said the number of homes purchased by people who divorced within two years accounted for more than one-tenth of total property transactions.

According to data from the Shenzhen Civil Affairs Bureau, the divorce rate surged 115% to 61,000 in 2017 from 28,000 in 2012.

Home prices in Shenzhen rose even higher in the same period. The average price per square meter in Shenzhen was about 54,000 yuan ($7,916) last year, up from about 18,000 yuan in 2012.

Similar divorce and property buying cases happened in other cities. Last month, a video showing a wife in Nanjing beating up a mistress on the street went viral.

Originally it was only a fight over a husband having a lover, but the mainland media found another reason behind the fight – the husband used the excuse of buying property to divorce. He transferred the property to his name and married a younger woman.

Asia Times Financial is now live. Linking accurate news, insightful analysis and local knowledge with the ATF China Bond 50 Index, the world's first benchmark cross sector Chinese Bond Indices. Read ATF now.