The impact of housing wealth on household consumption

Currently, China's housing market has entered a phase of destocking, and people's expectations for housing have generally changed compared to the period of rapid price increases in the past. In this context, this paper aims to explore the potential unintended impacts of housing net wealth on household consumption. Using data from the China Family Panel Studies (CFPS) database, we systematically examine the effects of housing net wealth on household consumption expenditures through panel data regression models and instrumental variable methods. The study finds that housing net wealth has a significant positive impact on household consumption. This result remains robust when using land supply as an instrumental variable and conducting a series of robustness tests. Furthermore, liquidity constraints play a crucial role in the impact of housing net wealth on household consumption. Additionally, the study finds that high-income households are more willing to consume when housing wealth increases compared to low-income households. In terms of consumption structure, housing wealth significantly influences developmental and survival consumption but shows no strong correlation with enjoyment consumption. Compared to families with multiple houses, families with only one house exhibit a stronger marginal effect of housing wealth appreciation on consumption expenditures. Finally, the paper distinguishes between regions with rising and falling house prices, finding that the consumption effect of housing net wealth is stronger in regions with rising house prices.