The Impact Of House Price On Urban Residents’ Consumption In Our Country

Since reform and opening up, China has made the surprising economic growth which attract the attention of the world, with the average annual GDP growth rate of 10%, and now has become the world’s second largest economy. With the rapid development of economy, China’s real estate market is booming. The prosperity of the real estate market has made great contribution to China’s economic growth and become the pillar industry of pulling our country’s economic growth for a period of time. Since the housing reform in 1998, real estate market is booming and house prices continue to rise. The average selling price of Commercial house rose from 2053 yuan/square meters in 1999 to 6237 yuan/square meters in 2013. To some extent, the development of the real estate market promote economic growth. But house prices rising too fast is likely to generate bubbles. In order to prevent the generation of the real estate market bubble, the government have taken some measures to regulate the real estate market. Besides the rising house prices, insufficient consumption also aroused people’s concern. In recent years, people’s living standards continue to improve, with the increase in income levels, the consumption level is also rising. Nevertheless, The contribution of consumption to economic growth is lower compared with other countries. Consumption, investment and export is troika which drive economic growth, but for a long time, our country’s economic growth is driven by investment and export. Since financial crisis in 2008, China’s external demand has greatly reduced, which caused negative influence on economic growth. So it’s more important to stimulate domestic demand in this situation. What kind of impact does house price on consumption? What factors the government should take into consideration when making policy? How to expand consumption of residents effectively? The research about the effect of house price on consumption will be more significance in this context.This paper uses the research methods combining theory research and empirical research. Firstly, sort out theory, summarize and conclude the classical consumption function and previous literature. Then make quantitative analysis and empirical analysis on the basis of theoretical analysis and establish the corresponding econometric model to research the relationship between house price and resident’s consumption. Firstly, study the impact of the rising house price on urban resident’s consumption which don’t conclude living consumption. And then further research the impact of house price on various consumer categories to find the effect of house price on consumption.The context conclude six parts. The first part is the introduction which concludes the research background, research contents, research methods, innovation and shortcomings of the article.The second part, summarizes and reviews the domestic and foreign scholars’research about the effect of house price on consumption. The third part introduces the relative theoretical basis and transmission mechanism of house prices’effect on residents’consumption. The fourth part introduces the relevant changes of house price in recent years and our country’s current consumption. The fifth part is the empirical research part. First study the effects of house prices on urban residents’total consumption which living consumption is removed, and then study the impact of rising house prices on various consumer categories or called the impact of house prices on consumption structure.The innovation of this paper is that taking time and regions into consideration at the same time and using the provincial panel data to make empirical research. Taking into account the dynamic of consumption and the endogenous of house price and income, use the system GMM estimation method to estimate the impact of rising house prices on urban residents per capita consumption.Although there are many scholars doing research about the impact of house price on consumption, few scholars research the impact of house price on different consumption categories which can be regarded as a highlight of this article.Through empirical research we can make conclusions as follows. Urban residents’ disposable income and consumption habits have a significant positive impact on the consumption of urban residents. House price has a significant positive impact on the total amount of non-residential consumption of urban residents. The impact of rising prices for different consumption categories are different. Overall, the rising house prices mainly promoted the enjoyable consumption, such as transportation and communication expenses,education and entertainment expenses, suppressed the living consumption spending such as food consumption.