The Effect Of Housing Price On Consumption:Crowding Out Or Wealth Effect?

As the pillar industry of China national economy,real estate industry has been growing at the top speed in recent years.However,it has also triggered situations like high leverage in the financial sector,overheating of real estate development,and the excessive housing price which can't meet the needs of residents`,causes the extrusion of the consumption demand of residents.Meanwhile,China's economic growth continues relying on the large-scale investment of the state and local governments,which leads to the imbalance of income distribution and uneven development between regions,and other problems.And also the financing distracted from their intended purpose,continuous invest to high income real estate and financial industry.So how to effectively stimulate the consumption of residents,and guide the consumption to become the main driving force for the development of national economy become a difficult problem in the transformation of China's economic structure.On the one hand,the real estate is a rigid demand consumer goods,but it is an investment product with investment income on the other.The two attributes determine the impact of housing prices changes have on different consumer groups,and ultimately lead to the changes in consumption.Because of the double attributes of real estate,the impact of housing price changes have on consumption cannot be studied as one common consumer goods.Considering the three problems mentioned above,this paper tries to explore the relationships between housing prices and consumption changes.If it is a simple one-way change or a two-way influence,and what the transmission mechanism and path of price impacts on consumption are.By setting up the dynamic panel data model,this paper uses the Threshold method of endogenous variables to make an empirical study,selected macro data from2002 to 2016 of 29 provinces and municipalities directly under the central government as sample observation data,the empirical analysis shows that the effect of rising housing prices on consumption in China is simultaneously affected by the wealth effect and the extrude effect.The different rising rates of housing prices cause the differences between the two effects,and finally different impacts on consumption.When the growth rate of housing prices is more than 5.26%,the positive effect from the wealth effect of consumption gradually decreases,the reverse inhibition effect of the extrusion effect is gradually enhanced,until the price rises to a critical value of12.27%,the influence of the extrude effect and the wealth effect reached equilibrium.If the rate of rising prices continues to grow,it will have a reverse effect on consumption.The research methods and results can also be applied to various provinces or cities,hoping to help to “administrate,regulate and control according to the local situation ",and stimulate consumption development at the same time.