Why Shanghai Couples Are Divorcing To Boost Their Real Estate Investments

In Shanghai, it’s easier to buy more real estate when you are not married. What can US investors learn from this?

By Jeff Vasishta October 25, 2016

Call it Conscious Uncoupling Shanghai Style. Married couples in China are rushing to untie the knot in a bid to circumvent laws aimed at limiting the number of properties a married couple can own. It’s all part of an effort prevent the collapse of Shanghai’s overheated real estate market, echoing the global real estate crash of 2008.  

Related: The $154 Million Dollar Home: Inside China’s Most Expensive Real Estate

Home purchasing rules in China treat married couples as a single unit. Currently, a first-time buyer and resident of Shanghai can buy one property with a 30 percent deposit and 10 percent discounted interest rate. A married couple can buy up to two properties. The deposit for the second property has to be between 50 percent and 70 percent. So by getting a divorce, even if it’s just on paper, couples can once again get the more favorable deposit rates enjoyed by individuals.

Photo courtesy of
Photo courtesy of

A rumor spread on social media caught fire like a cigarette in California brush, that authorities were hip to the loophole and as of September 1st , were planning a 12 month hold on newly divorced couples buying properties even as individuals. The ensuing stampede to splitsville shows just how enamored Shanghai investors are with buying property even in a dangerously overheated market. It also offered a justifiable exit strategy for miserably married husbands and wives bound by social mores.

The Shanghai real estate rush has stark similarities with the US market of 2008. Prior to the crash there was a free for all on how many mortgages investors could have—20, 30 or more—many with little to no documentation. After the crash that number was slashed to four, with heavy loan qualification criteria. The number has since been lifted to ten but it’s rare to find a bank that will lend to investors with multiple properties. The irony is that today it’s a real advantage to be a landlord or own multiple properties. Interest rates are low and rents in places like San Francisco, New York and Seattle are at all-time highs. There’s the least risk that there has ever been for banks. Also, a secret that banks might not want the public to know is that the US housing market is reliant on investors owning multiple properties to keep it buoyant. Thus, the increase in private lending, something banks hate but are presently powerless to stop.

A similar strategy as used with divorcing Shanghai couples could help US buyers increase their portfolios. Part of the criteria US banks look for when qualifying for a mortgages are credit scores and tax returns. Most couples apply for a mortgage together and file jointly. As a result, all properties will show up on the joint return and the loan on both credit scores as if both are financially responsible. If, however, couples apply for houses separately and file separate returns, both houses will not show up on each other’s credit score or tax returns., freeing up partners to qualify for other loans.

“Unfortunately, mortgage companies won’t simply use the highest credit score between the two of you,” says Lindsay Villasenor, a Quicken Loans operations director “or even the average of your scores; they’ll pay the most attention to the lowest credit score. So if your spouse has a credit score that would prevent you from getting the best possible rates, you might consider leaving your spouse off the mortgage.”

The final twist in Shanghai’s divorce rush is that the government has denied contemplating the 12-month rule and has yet to enact it or anything resembling it. It remains to be seen how many of the divorced couples will remarry.


Jeff Vasishta



Jeff is a writer, husband and father but not necessarily in that order. As a music journalist he counts Prince, Beyonce and Quincy Jones amongst those he’s interviewed. He's also owned and flipped homes in Brooklyn, NJ, CT and PA.

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