Study On Wealth Effect Of Real Estate In China

The real estate market develops quite fast with its expanding scale and rising price,and has become the main pillar industries of the national economy gradually since Chinese housing reform in 1998.To expand domestic demand,on the other hand,has always been the main focus of the national economic work.Therefore,studies on Chinese housing wealth effect on residents' consumption and national economy have important practical point on the background of current real estate market's adjustment and growing differentiation of regional real estate market,considering the high housing ownership rates,high ratio of housing assets in total family assets and special meaning of housing in traditional culture in China.The concept of wealth effect refers that ceteris paribus,the change of real money balance will lead to that of total consumer spending.Real estate is one of the most important household wealth.The household wealth increase,as the house prices go up,leads to the increase of household spending.This coherent relationship between consumption and house price is called real estate wealth effect.Since the collapse of global stock markets in the end of 1990s,real estate wealth effect has received extensive attention of scholars.This paper focuses on the wealth effect of Chinese real estate market as its research subject.Based on relative theories and literatures of housing wealth effect,combining the specific background in Chinese housing market,this paper analyzes the affection of the price changes and the change of real estate wealth on consumption,investment and macro output.The existence,asymmetry and performance characteristics of housing wealth effect have been analyzed comprehensively from the aspect of theory and empirical research.And then comes out the policy advices according to the research conclusion.The dissertation has six parts.The first chapter is the introduction,in which the background and significance,main content and research method of this paper has carried on.Meanwhile,it also induces the innovation points of this research.The second chapter concludes relative theories and literatures of real estate wealth effect.The definition of real estate wealth effect has been put forward firstly,which is extended to the impact of housing market fluctuation on consumption,investment and macro economy under monetary policy transmission mechanism as generalized wealth effect.On the basic of this definition,this chapter reviews the relative literatures from four aspects of real estate wealth effect's transmission channels,existence,performance characteristics and the relationship between housing market and macro economy in monetary policy transmission mechanism.The third chapter carries on an empirical analysis of the existence and asymmetry of real estate wealth effect since the housing market reform in China.In the aspect of existence,a dynamic panel model is built to analyze the impact of housing prices change on resident consumption based on 30 provinces' data empirically.It concludes that housing prices change has significant positive wealth effect on resident consumption,but the rising price mainly pulls up the consumption in high-income areas.In the aspect of asymmetry,using provincial panel data and household micro data,this chapter tests the asymmetry of the real estate wealth effect in China based on prospect theory.The result shows that the regression coefficients of provincial panel data cohere with theoretical expectations numerically,but statistically insignificant.The reason of this may be that Chinese housing price has experience a long period of rising channel since the housing market reform,while the falling samples are rare.As a result,the impact of falling house prices on consumption fails to reflect sufficently.In order to solve this problem,the subsequent part takes a test again using household micro data which contain richer samples,and the significant results prove the asymmetry performance of real estate wealth effect which is consistent with prospect theory.Compared with housing wealth increase,the same degree of housing wealth decrease brings more resident consumption decline.The forth chapter analyzes the performance character of Chinese real estate wealth effect in detail based on CHFS micro survey data.The different impacts of household housing wealth changes on different categories of consumption have been tested firstly.Moreover,it surveys the influence of age,region,income and risk attitude of household on real estate wealth effect.In addition,the role of different transmission channels in housing wealth effect has been discussed.The result shows that changes in housing wealth mainly influence the basic necessities while there're no significant implications on developing entertainmental consumption.In the aspect of household heterogeneity,the real estate wealth effect is different among different kinds of families,which is significantly influenced by the age of the head of household,the household income,the location of family and household risk attitude.Unlike the situation in western countries,the real estate wealth effect of young families is higher than that of old-age families in China,which shows Chinese residents' stronger heritage motivation.The income influence on real estate wealth effect is U-shaped that high-income families have the strongest real estate wealth effect and low-middle-income families have the weakest.It reflects that the motivation of Chinese middle-income household tend to be strong in improving living conditions.Housing wealth effect in western region is significantly higher than that in eastern and central region.What's more,the household risk attitude also has a significant impact on real estate wealth effect.The influence of housing wealth on consumption decreases with the increase of risk aversion degree.The higher risk aversion significantly weakens the positive real estate wealth effect.In terms of transmission channels,precautionary saving channel and liquidity constraint channel both play a role in housing wealth effect on families that own more than one set of house.While in general,the increase of housing wealth reduces household precautionary saving motivation,but the liquidity constraint has not been relieved effectively.The fifth chapter extends the view of real estate wealth effect from consumption to macroeconomy,and analyzes the generalized real estate wealth effect.It investigates the difference and interactivity of regional housing markets in China firstly by using the methods of dynamic correlation analysis and principal component analysis,based on 35 important cities' housing market data from 2005 to 2014.And then it analyzes the impact of housing market on resident consumption,social investment,and economic growth in monetary policy transmission with the premise of interaction of regional housing markets.By using GVAR model based on 2005-2014 provincial panel data,the generalized real estate wealth effect has been studied.The empirical result shows that monetary policy transmission to real estate market is unblocked.The feedback of regional housing prices to the shock of M2 is positive and lasting,and negative and lasting to interest rate shock.The impact of rising housing prices on the economic variables of regions has obviously regional characteristics.Rising housing price in central region has a greater and sustained positive impact on consumption,investment and output.While the housing prices in eastern and western region only produce a stimulating effect on consumption in the short term,and the influence on consumption,investment and output is negative and weak in a long run.Lastly,the role of real estate market in monetary policy transmission has been verified.The transmission effect for interest rate is better than that for M2.In addition,the transmission effect in central region is generally higher than that in eastern and westren region.The sixth chapter gives the conclusion of this dissertation and puts forward some policy suggestions.On the basis of ensuring the steady growth of resident income,the behavioral difference of different kinds of household and region's actual local conditions should be considered sufficiently during the relative policy-makings and housing market regulations.As a result,the policy could be more targeted to keep housing market running smoothly,and playing a better role in stimulating domestic demand and promoting economic growth.The innovations of this dissertation can be described in three aspects as below.(1)The asymmetry of real estate wealth effect in China has been tested based on prospect theory in behavioral economics.This significant empirical result from household micro data verifies the asymmetry effect of changes in household wealth on resident consumption,which provides an empirical evidence for the applicability of prospect theory in Chinese housing wealth effect.This is very important during the current period of housing market adjustment and differentiation growing among regional real estate in China.(2)Household risk attitude is introduced to the analysis of Chinese real estate wealth effect.The influence on real estate wealth effect of household risk attitude is inspected using household micro data.Meanwhile,the influence of families' basic characteristics on household risk attitude is investigated by using multivariate Logit model.This could provide more bases for the study of micro agent's behavioral characteristics in Chinese real estate wealth effect.(3)The global vector autoregressive(GVAR)model was used to study generalized wealth effect of real estate in China.Under the premise of difference and interaction of regional real estate markets,the empirical test of the housing market fluctuation's influence on resident consumption,social investment and macro output is carried on.It overcomes the neglecting of regional housing markets' difference and interaction in previous studies so that the reliability of the empirical result may be improved.