Influence Of Real Estate Price Fluctuation On Consumption Of Urban Residents

Continued volatility in the price of real estate, real estate investment in China continues to grow and demand (mainly consumer demand) relative lack of economic circumstances, due to China’s real estate as a resident of one of the fixed asset, the prices there are changes all the time, so real estate market price fluctuations will not have an impact on consumption behavior of urban residents has been concerned by theorists and the relevant government departments. So the real estate price volatility for influence consumer behavior in this topic, an important theoretical and practical background.In July1998, the State Council issued the State Council on further deepening the reform of the urban housing system, issued the notice on accelerating the construction of houses, began to eliminate the welfare housing distribution as a prelude to the feature of housing system reform in China since the introduction of commercialization in China’s urban housing system, after the reform of the housing system, real estate prices have continued to rise. We took in2004as the demarcation point, from2001to2003, real estate prices are still relatively small between; a rise between2004and2011property price levels are relatively high. Such as real estate prices of the last quarter of2004was2,480Yuan, by the last quarter of2011that figure into5,430, after a simple calculation average annual growth rate of11.8%.Based on permanent income hypothesis, the real estate price change permanent income have an impact on the population, so consumer spending of urban residents will be some effect. The other hand, income continued to grow in China, urban residents consumption expenditure will continue to grow, we found out that the annual consumption rate has been declining. On the real estate market wealth effect in recent years, and much of the research on the relationship between residents consumption, in these studies, for the real estate market wealth effect and the relationship between household consumption expenditure does not factor in economic cycles. Therefore, this paper will focus on a different economic cycle, China’s real estate market price fluctuations will affect household consumption expenditure.As rational consumers, they will at this stage I’ve judged the economic situation, leading to the adoption of different economic stages to decide their own consumer sentiment and spending power, so the study factors in the economic cycle to observe the influence of real estate price market on consumer spending. Taking into account the different economic cycles that in periods of economic expansion and contraction in the economy at the time of real estate price fluctuations had a different impact on residents’consumption. In the economic cycle, this paper contains dummy variables vector error correction model (VECM). Vector error correction model analysis with dummy variables to estimate when economic stage at different points in time, real estate wealth effect is not the same. In times of economic expansion, whenever the real estate price growth rate increased1%, growth in consumption will increase0.45%, in times of economic contraction, whenever the real estate price growth rate increased1%, growth in consumption would be reduced by about0.17%. Finally come to a conclusion, the wealth effect of housing and real estate price change and the relevant not only, but also associated with consumers’expectations of economic cycles.