Influence Of Chongqing City Real Estate Price Changes On Household Consumption Of All Income Groups

Market-oriented reforms of real estate market are the effective measures topromote consumption, expand domestic demand, stimulate investment growth andmaintain a sustained, rapid and healthy development of national economy. However,with the prosperity and development of China’s real estate market, appears thecoexistence of the high real estate prices and the decreased household consumptionrate.It has become important factors hindering China’s economic growth. Real estate isan important part of our household wealth. To find the intrinsic link between real estateand consumer, analyze the ways that price changes of real estate affect the residentconsumption and verify whether the wealth effect of the real estate market effectivelyplays, this article chooses Chongqing as an example, to study the influence of realestate price changes in the specific area on the local residents consumption.The paper summarizes the related theories of real estate price’s influence onhousehold consumption, analyzes the residents consumption situation and the currentdevelopment of the real estate market in Chongqing. On this basis the paper selectsChongqing’s quarterly time series from1999to2012to empirically analyze the impactof real estate prices on household consumption, using the co-integration test and VECmodel. Then the paper selects Chongqing’s annual data from2000to2012to analyzethe different impacts of real estate price fluctuation on residents with different incomelevel, using panel data models. The empirical results of time series show that:disposable income is the most important factor affecting the consumption. In the shortterm, the wealth effect of rising house prices is greater than the crowding-out effect inChongqing which promote consumption. In the long term, the wealth effect of risinghouse prices is less than the extrusion effect in Chongqing which suppressconsumption. The empirical results of panel data show that the rising of real estateprices in Chongqing can promote the consumption of low income group and highincome group, but inhibit the consumption of lower-middle, middle and upper-middleincome groups. Next, the paper analyzes the reasons of empirical results and disc ussesthe problems existing in the development of China’s real estate market. The problemsmainly cover the imbalance supply and demand structure of real estate market, thesoaring housing prices, the flawed system and unsound social security. Finally, thepaper derives several relative policy implications about exerting the real estate wealtheffect, attaching great importance to the function of people’s livelihood security of real estate and differentiating the control measures among the various income groups.