Housing wealth appreciation and consumption: evidence from China

This article examines the effect of housing wealth appreciation on household consumption by using two rounds of China Household Finance Survey data from 2013 and 2015. The empirical results show that housing wealth appreciation leads to an increase in household consumption, especially for consumptio...

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Bibliographic Details
Published inJournal of the Asia Pacific economy Vol. 24; no. 4; pp. 556 - 577
Main Authors Peng, Changyan, Qiu, Weisong, Song, Quanyun, Huang, Bihong
Format Journal Article
LanguageEnglish
Published London Routledge 02.10.2019
Routledge, Taylor & Francis Group
Subjects
Appreciation
China
Consumption
Economic models
Elasticity
Finance
Households
Housing
Housing costs
Housing market
Housing wealth appreciation
Policy making
Polls & surveys
Prices
Wealth
China
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Summary:This article examines the effect of housing wealth appreciation on household consumption by using two rounds of China Household Finance Survey data from 2013 and 2015. The empirical results show that housing wealth appreciation leads to an increase in household consumption, especially for consumption goods with higher expenditure elasticities, suggesting that increase in housing wealth not only promotes household consumption but also improves the composition of the consumption. Estimations on different subsamples suggest that precautionary saving acts as the primary mechanism through which housing wealth appreciation affects consumption in China. The analysis further reveals that household consumption lags behind housing wealth appreciation. We conclude that drastic changes in house prices are likely to exhibit augmented effects on the real economy via the consumption channel. Policymakers in China should prevent large swings in housing prices while taking regulatory steps to control the housing market.
ISSN:1354-7860
1469-9648
DOI:10.1080/13547860.2019.1661570