In September, Chinese new home prices rose by a massive 2.1%, extending the gains over the past year to 11.2%, the fastest pace seen in seven years.
It was another enormous increase, thwarting measures introduced by regulators in over 20 major cities to curb rapid price growth.
And, according to some analysts, the re-acceleration in price growth may have been in response to those measures being announced, bringing forward even more demand as investors, worried that tighter restrictions may be implemented in the future, rushed to buy.
It’s a remarkable response, but one that is becoming increasing familiar as investors find ever-inventive ways to speculate on further price gains.
Take the example of Mr and Mrs Cai, a couple from Shanghai, as just one indication of the extreme lengths some people will go to in order to circumvent tighter housing market restrictions introduced by policymakers in the city.
Bloomberg, in an eye-opening report, explains the reason behind the Cai’s decision:
The rationale wasn’t 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 ($532,583), adding to three places they already own. But the local government had begun, among other bubble-fighting 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 Cai, 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.”
“If we don’t buy this apartment, we’ll miss the chance to get rich”, seemingly enough for this couple to split, at least from a legal perspective.
When looking at price growth in the city over the past year — some 32.7% according to China’s NBS — it’s little wonder that they’re suffering a case of the “fear of missing out”, or FOMO, as it is known.
Although this is just one example of the extreme length’s that some people will go to, it underlines how measures to cool housing market conditions can be circumvented, not only limiting their effectiveness but increasing the likelihood of even more complex restrictions being put in place.
At this point the jury is still out as to whether these recently announced restrictions on prospective house prices will have a meaningful, and lasting, impact.
Xia Dan, a Shanghai-based analyst at the state-owned Bank of Communications, believes they’re unlikely to be enough.
“The curbs will show their effect in the initial two-to-three months, but in the longer term idle capital will still likely flow to property in the largest hubs as ‘safe-heaven’ assets,” she told Bloomberg.
Dan believes the impact of the curbs will gradually abate as “liquidity is so abundant in a credit binge”.
You can read more about the divorce-to-buy plan at Bloomberg.