The Research On The Relationship Between The Urban Non-living Consumption And The House Price In China

With the15years of prosperity in China’s real estate market, the real estate has become an important part of the household wealth, at the same time, China’s per capital consumption of urban resident has increased, while the ratio of per capital consumption to disposable income has declined. How to expand the domestic consumption demand, and curb housing prices rise rapidly has become the focus of macro-control in the recent years, besides, whether the influence of housing prices on consumption is the positive wealth effect or the negative substitution effect has also become the emphasis in the academic field. This paper considered that the characteristics of China’s real estate market may result in the difference about the influence of housing prices on consumption from other countries, what’s more, faced with increasing house prices, household with different incomes, different property types, different age, different education levels, or from different regions, may make different consumer decision. Therefore it is necessary to research on the relationship between the consumption and house prices from micro perspective.At first, based on the life cycle and permanent income hypothesis and reference the optimally intertemporal model in RCK model, this paper studied the impacts of house prices changes on the urban non-living consumption through adding market friction factors, such as transaction taxes, information costs, down-payment, holding tax. Secondly, using the cross-section data of2002and2007, this paper analyzed the heterogeneity under different levels of income, age, education and different property types. At last, using panel annual data of35cities in China from2002to2012, analyzed the heterogeneity under different regions and times, which can remedy the limitation of the cross-section data. What’s more, adding the consumption habits in the panel data model, this paper researched the impacts of the house prices on the consumption in the next period through ratchet effect.Based on the above models and empirical results, on the one hand, this paper considered that the rise of house prices can promote the non-living consumption of the household owning at least one house, and the consumption elasticity of the housing wealth was0.08to0.09. Firstly, the income of the household was higher, the wealth effect was more obvious; secondly, with the rise of the household age, the wealth effect showed an inverted U-shape; thirdly, the household with better education has larger wealth effect; fourthly, as time went on the wealth effect showed a slight decline; at last, the regions with higher consumption has stronger wealth effect. On the other hand, this paper considered that the rise of house prices has the negative impact on the non-living consumption of the household renting a house. As house prices rising, the inhibitory action was larger, and the substitution effect was more significant in the regions of higher consumption. Furthermore, the consumption habits made the fluctuation time longer after consumption was stimulated by outside. When the transaction cost was increased, the mortgage policy tightened, or the cost of ownership reduced, the fluctuation of consumption which caused by the rise of house prices would aggravate.