Impact of Fluctuation in House Price on Urban Household Consumption

The house price in China is boosting, that influences on the consumption of urban residents in recent years. According to Keynes Consumption Theory, this paper chooses average house retail price and per capita disposable income as variables and panel data in 31 provinces from 2003 to 2012 as samples in order to discuss the influences of house price fluctuation and urban residents. Through empirical analysis, this paper finds out that the main influence which the house price fluctuation has on the consumption of urban residents is crowding-out effect. Besides, this paper explores the relation between Consumer Confidence Index (CCI) and house retail price index and proves that house price increasing has a negative effect on CCL which will restrain household consumption. Therefore, to slow down the rising speed of house price and ease residents' pressure, government should complete laws and regulations and offer more economically affordable housing and low-rent housing. Real estate developers should consider building more affordable houses for residents while making profits. Consumers should make investments in real estate rationally so that the real estate will not become overheated.