The impact of housing price on non-housing consumption of the Chinese households: A general equilibrium analysis

In recent years, the absolute values of the housing price and the households' non-housing consumption in China are both on the rise, but many documents studying on the impact that the ever-changing housing price exerts on Chinese households' consumption consider that the rise of housing price represses the households' consumption expenditure. This paper constructs a general equilibrium model to explain the impact of housing price changes on the consumption expenditure of urban residents. The result shows that the rise in housing prices has both crowding-out and wealth effects for households' consumption. Further, the empirical test shows that during the period of "2006-2010", for every 1% rise in housing prices, the total retail sales of consumer goods falls by 0.332%; and to the contrast, during the "2011-2015" period, for every 1% rise in housing price, the total retail sales of consumer goods are increased by 0.207%. The above results indicate that along with the increase in housing holding areas, the impact of housing price changes on households' consumption has gradually shifted from the crowding-out effect to the wealth effect. We also find out that external speculative demand makes the impact of housing price rise on local residents' consumption manifested as the crowding-out effect, However, in the regions with weaker external speculative demand, the impact of housing price changes on households' consumption is mainly shown as the wealth effect.