Housing Assets, Price Fluctuation And Consumption Behavior Of Urban Residents In China

For a long time, the relationship between asset price volatility and consumption has attracted much attention from macroeconomic policy makers and economic theory researchers. But before the1990s, the attention had been focused on the financial asset market (represented by the stock price). Until the late1990s, the study on wealth effect of real estate market has been paid much more attention than before.As the housing reform in China, more and more urban families have their own homes, and at the same time the asset attributes of housing is becoming increasingly prominent. To this day, the housing has already become the private property of major urban families. Under such a background, to research the influence of house price fluctuation on household consumption becomes a very important issue for the government and scholars, which is the reason for writing the dissertation.Based on modern consumption theory and considering the particularity of China’s real estate market, this paper makes a comprehensive study of the relationship between housing price’s fluctuation and China urban residents’ consumer behavior in a qualitative and quantitative way, emphasizing on the positive analysis. The dissertation consists of seven chapters. Chapter1is introduction, Chapter2introduces the real estate market development since China’s housing reform and the related literatures. Chapter3is based on literatures of the consumption function and wealth effect, combining the special properties of housing assets, the source of the house price fluctuation, the dynamics of consumption growth, uncertainty and liquidity constraints to analyze the size, the dynamic characteristics and transmission mechanism of the consumption effect from house price fluctuation. Then Chapter4tests the dynamic relationship between house price fluctuation and urban residents’ consumer behavior from an overall view; Chapter5discovers the differences of impacts between different regions, income groups and consumption categories. Chapter6tests the influence channels of house price fluctuation on urban residents’ consumption behavior. Chapter7is the conclusions and suggestions. The mainly conclusions and innovations are as follows:First, in order to increase the validity of the analysis, this dissertation uses two different but complementary methods to test the dynamic relationship between house price fluctuation and urban residents’ consumption. The result shows until after2003house price fluctuation has had significant influence on urban residents’ consumption. The rise of house price has a negative effect on urban residents’consumption in the short term, whereas a positive effect in the long run. This dynamic influencing path is different from western countries’, which is a gradually increasing process. This means the rise of house price mainly increase the current consumer spending and result in an intense fluctuation of consumption. Domestic studies mainly emphasize on the judgement of the direction, but rarely base on the dynamic analysis of influencing process. Therefore, this paper makes up this deficiency to a certain extent.Second, this dissertation uses dynamic panel regression model to exam the differences of impacts between different regions. The result shows:the rise of house price will weakly promote consumer spending in the long time in east region; will weakly inhibit consumer spending in central region; will significantly promote consumer spending in the short time in western region. Further research has found that:the rise of house prices will significantly inhibit consumer spending in the long time in high-price regions; will significantly promote consumer spending in the long time in middle-price regions; will weakly promote consumer spending in the short time in lower-price regions. That means only if controlling the house price to the moderate level will the increasing house price promote the consumption effectively. And the more developed the real estate market and the financial markets are, the more continual the wealth effect.Third, the dissertation uses dynamic panel regression model to exam the differences of impacts between different income groups. The result shows:the rise of house price will mainly promote the current consumption of middle-income households, but significantly inhibit the consumption of low-income households in the long time, and for high-income households there is no statistical positive relationship between changes in house prices and consumer spending. Further research has found that:the rise of house prices will mainly promote consumer speding on transport and communications, as well as education and recreation, but inhibit consumer speding on food、clothing and medician. So the rise of house price will improve the residents’ consumption structure to some extent, but will increase consumption inequality.Forth, the test on how house price fluctuation affects urban residents’ consumption behavior finds that the rise of house prices can promote current consumption to a certain extent. However housing assets mainly play the role of consumption insurance, and secondly relax the borrowing constraints, but don’t produce pure wealth effect. So housing wealth are not incorporated into the resource allocation throughout the life cycle, and income still is the main factors affecting consumers’ consumption. Based on modern consumption theory and considering the particularity of China urban residents’ consumer behavior, this dissertation compare the mechanism of house price fluctuation on urban residents’ consumer behavior and makes an empirical test with available data, which has strong theoretical and empirical value.The policy implications of this paper is:on the whole, government should not hope to increase the residents’ consumption by pushing up or bring down the housing price. From the long-term perspective, government should improve the income of the residents, guide housing consumption, and build bi-channels housing supply system with general housing and security housing to stabilize the house prices. Second, government should strengthen the innovation mechanism of housing consumer finance to promote the wealth effect of the housing assets. Last, instead of making universal housing policy, government should take into consideration the different supply-demand relationships of different regions and income groups before making the regulation policy.