How does household consumption respond to housing price changes in China?

Abstract

How house price changes impact household consumption is a long-lasting debate in macroeconomics. Previous literature mainly analyses this relationship with macro-level data, while this thesis aims to identify the relationship using a micro-level dataset in the Chinese context. With OLS regression, it demonstrates that there is a positive relationship between household consumption and house price. This conclusion applies to both homeowners and non-owners during the sample period. Meanwhile, for households who are experiencing a transfer in homeownership, meaning selling or buying a house, higher house prices would also lead to higher consumption. If a household bought or sold a house, the consumption level would increase. Additionally, there exists regional heterogeneity in the relationship between family consumption and housing prices. Such heterogeneity problems also exist in households from different social hierarchies who live in different types of houses.