Housing price, family structures and household consumption: Empirical evidence of Taiwan
Abstract
The housing price affects the allocation of family budget on consumption. We use regression analysis to confirm whether Taiwan’s housing prices have a significant influence on household consumption based on the questionnaire survey on household income and expenditure in 2018. We find that housing prices have the greatest impact on household consumption, possibly because housing accounts for the largest proportion of household assets, implying a significant wealth effect. In addition, the impact of interest of deposit on consumption is also found to be greater than that of household income as it is related to the level of total assets. The housing prices for single-person household with female gender have a negative and significant impact on household consumption. Finally, housing prices are found to have a significantly negative effect on non-consumption and current transfer expenditure. The possible reason is that the households who hold the house believe that the appreciation of housing price can provide more protection for the family from suffering from possible economic risks in the future and thus crowd out non-consumption expenditures.
Keyword : housing price, family structures, household consumption, wealth effect, non-consumption expenditure, current transfer expenditure
How to Cite
Hung, C.-H., Chen, Y.-H., Cheng, C.-C., & Tzang, S.-W. (2024). Housing price, family structures and household consumption: Empirical evidence of Taiwan. International Journal of Strategic Property Management, 28(4), 211–222. https://doi.org/10.3846/ijspm.2024.21675
This work is licensed under a Creative Commons Attribution 4.0 International License.
References
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Fereidouni, H. G., & Tajaddini, R. (2017). Housing wealth, financial wealth and consumption expenditure: The role of consumer confidence. The Journal of Real Estate Finance & Economics, 54(2), 216–236. https://doi.org/10.1007/s11146-015-9537-9
Gourinchas, P.-O., & Parker, J. A. (2002). Consumption over the life cycle. Econometrica, 70(1), 47–89. https://doi.org/10.1111/1468-0262.00269
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Guo, S., & Hardin, W. G. (2017). Financial and housing wealth, expenditures and the dividend to ownership. The Journal of Real Estate Finance and Economics, 54(1), 58–96. https://doi.org/10.1007/s11146-015-9540-1
Hall, R. E., & Mishkin, F. S. (1982). The sensitivity of consumption to transitory income: Estimates from panel data on households. Econometrica, 50(2), 461–481. https://doi.org/10.2307/1912638
Hui, E. C., & Wang, Z. (2014). Price anomalies and effectiveness of macro control policies: Evidence from Chinese housing markets. Land Use Policy, 39, 96–109. https://doi.org/10.1016/j.landusepol.2014.04.003
Lettau, M., & Ludvigson, S. C. (2004). Understanding trend and cycle in asset values: Reevaluating the wealth effect on consumption. The American Economic Review, 94(1), 276–299. https://doi.org/10.1257/000282804322970805
Lim, M. (2020). A study on gender difference of housing costs: Focusing on single-person household. Korean Assocation for Housing Policy Studies, 28(2), 113–129. https://doi.org/10.24957/hsr.2020.28.2.113
Mian, A., Rao, K., & Sufi, A. (2013). Household balance sheets, consumption, and the economic slump. The Quarterly Journal of Economics, 128(4), 1687–1726. https://doi.org/10.1093/qje/qjt020
Mitroshin, I. V. (2022). Income and consumer spending of households in Russia. Research Result. Economic Research, 8(2), 74–84. https://doi.org/10.18413/2409-1634-2022-8-2-0-8
Ogawa, K., & Wan, J. (2007). Household debt and consumption: A quantitative analysis based on household micro data for Japan. Journal of Housing Economics, 16(2), 127–142. https://doi.org/10.1016/j.jhe.2007.02.001
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Poterba, J. M. (2000). Stock market wealth and consumption. Journal of Economic Perspectives, 14(2), 99–118. https://doi.org/10.1257/jep.14.2.99
Sheiner, L. (1995). Housing prices and the savings of renters. Journal of Urban Economics, 38(1), 94–125. https://doi.org/10.1006/juec.1995.1024
Sun, X., Su, Y., Liu, H., & Li, C. (2022). The impact of house price on urban household consumption: Micro evidence from China. Sustainability, 14(19), Article 12592. https://doi.org/10.3390/su141912592
Survey Research Data Archive, Directorate-General of Budget, Accounting and Statistics, Executive Yuan. (2019). The survey of family income and expenditure, 2018. Academia Sinica. https://doi.org/10.6141/TW-SRDA-AA170043-1
Wachter, J. A., & Yogo, M. (2010). Why do household portfolio shares rise in wealth? The Review of Financial Studies, 23(11), 3929–3965. https://doi.org/10.1093/rfs/hhq092
Xie, Y., & Jin, Y. (2015). Household wealth in China. Chinese Sociological Review, 47(3), 203–229. https://doi.org/10.1080/21620555.2015.1032158
Yuan, D.-M., Liu, J.-J., & Yang, Q. (2011). Empirical study on the influence of the rising housing price on resident consumption. International Conference on Management and Service Science (pp. 1–4), Wuhan, China. https://doi.org/10.1109/ICMSS.2011.5998436
Attanasio, O. P., Blow, L., Hamilton, R., & Leicester, A. (2009). Booms and busts: Consumption, house prices and expectations. Economica, 76(301), 20–50. https://doi.org/10.1111/j.1468-0335.2008.00708.x
Benjamin, J. D., Chinloy, P., & Jud, G. D. (2004). Real estate versus financial wealth in consumption. The Journal of Real Estate Finance and Economics, 29, 341–354. https://doi.org/10.1023/B:REAL.0000036677.42950.98
Berger, D., Guerrieri, V., Lorenzoni, G., & Vavra, J. (2018). House prices and consumer spending. Review of Economic Studies, 85(3), 1502–1542. https://doi.org/10.1093/restud/rdx060
Bhatia, K. B. (1987). Real estate assets and consumer spending. Quarterly Journal of Economics, 102(2), 437–444. https://doi.org/10.2307/1885072
Bloemen, H. G., & Stancanelli, E. G. F. (2005). Financial wealth, consumption smoothing and income shocks arising from job loss. Economica, 72(287), 431–452. https://doi.org/10.1111/j.0013-0427.2005.00424.x
Bostic, R., Gabriel, S., & Painter, G. (2009). Housing wealth, financial wealth, and consumption: New evidence from micro data. Regional Science and Urban Economics, 39(1), 79–89. https://doi.org/10.1016/j.regsciurbeco.2008.06.002
Buiter, W. H. (2010). Housing wealth isn’t wealth. The Open-Access, Open-Assessment E-Journal, 4(22), 1–29. https://doi.org/10.5018/economics-ejournal.ja.2010-22
Campbell, J. Y., & Cocco, J. F. (2007). How do house prices affect consumption? Evidence from micro data. Journal of Monetary Economics, 54(3), 591–621. https://doi.org/10.1016/j.jmoneco.2005.10.016
Campbell, J. Y., & Mankiw, N. G. (1991). The response of consumption to income: A cross-country investigation. European Economic Review, 35(4), 723–756. https://doi.org/10.1016/0014-2921(91)90033-F
Caporale, G. M, Lodh, S., & Nandy, M. (2018). How has the global financial crisis affected syndicated loan terms in emerging markets? Evidence from China. International Journal of Finanace & Economics, 23(4), 478–491. https://doi.org/10.1002/ijfe.1633
Carroll, C. D. (1997). Buffer-stock saving and the life cycle/permanent income hypothesis. The Quarterly Journal of Economics, 112(1), 1–55. https://doi.org/10.1162/003355397555109
Carroll, C. D., Otzuka, M., & Slacalek, J. (2011). How large are housing and financial wealth effects? A new approach. Journal of Money, Credit and Banking, 43(1), 55–79. https://doi.org/10.1111/j.1538-4616.2010.00365.x
Case, K. E., Quigley, J. M., & Shiller, R. J. (2005). Comparing wealth effects: The stock market versus the housing market. Topics in Macroeconomics, 5(1), 1–32. https://doi.org/10.2202/1534-6013.1235
Catte, P., Girouard, N., Price, R. W., & André, C. (2004). Housing markets, wealth and the business cycle (OECD Economics Department Working Papers No. 394). OECD Publishing. https://doi.org/10.1787/534328100627
Chen, J. (2006). Re-evaluating the association between housing wealth and aggregate consumption: New evidence from Sweden. Journal of Housing Economics, 15(4), 321–348. https://doi.org/10.1016/j.jhe.2006.10.004
Chen, J., Hardin, W., & Hu, M. (2020). Housing, wealth, income and consumption: China and homeownership heterogeneity. Real Estate Economics, 48(2), 373–405. https://doi.org/10.1111/1540-6229.12245
DeFusco, A. A. (2018). Homeowner borrowing and housing collateral: New evidence from expiring price controls. The Journal of Finance, 73(2), 523–573. https://doi.org/10.1111/jofi.12602
Elliot, J. W. (1980). Wealth and wealth proxies in a permanent income model. Quarterly Journal of Economics, 95(3), 509–535. https://doi.org/10.2307/1885091
Fereidouni, H. G., & Tajaddini, R. (2017). Housing wealth, financial wealth and consumption expenditure: The role of consumer confidence. The Journal of Real Estate Finance & Economics, 54(2), 216–236. https://doi.org/10.1007/s11146-015-9537-9
Gourinchas, P.-O., & Parker, J. A. (2002). Consumption over the life cycle. Econometrica, 70(1), 47–89. https://doi.org/10.1111/1468-0262.00269
Guo, S., & Hardin, W. G. (2014). Wealth, composition, housing, income and consumption. The Journal of Real Estate Finance and Economics, 48(2), 221–243. https://doi.org/10.1007/s11146-012-9390-z
Guo, S., & Hardin, W. G. (2017). Financial and housing wealth, expenditures and the dividend to ownership. The Journal of Real Estate Finance and Economics, 54(1), 58–96. https://doi.org/10.1007/s11146-015-9540-1
Hall, R. E., & Mishkin, F. S. (1982). The sensitivity of consumption to transitory income: Estimates from panel data on households. Econometrica, 50(2), 461–481. https://doi.org/10.2307/1912638
Hui, E. C., & Wang, Z. (2014). Price anomalies and effectiveness of macro control policies: Evidence from Chinese housing markets. Land Use Policy, 39, 96–109. https://doi.org/10.1016/j.landusepol.2014.04.003
Lettau, M., & Ludvigson, S. C. (2004). Understanding trend and cycle in asset values: Reevaluating the wealth effect on consumption. The American Economic Review, 94(1), 276–299. https://doi.org/10.1257/000282804322970805
Lim, M. (2020). A study on gender difference of housing costs: Focusing on single-person household. Korean Assocation for Housing Policy Studies, 28(2), 113–129. https://doi.org/10.24957/hsr.2020.28.2.113
Mian, A., Rao, K., & Sufi, A. (2013). Household balance sheets, consumption, and the economic slump. The Quarterly Journal of Economics, 128(4), 1687–1726. https://doi.org/10.1093/qje/qjt020
Mitroshin, I. V. (2022). Income and consumer spending of households in Russia. Research Result. Economic Research, 8(2), 74–84. https://doi.org/10.18413/2409-1634-2022-8-2-0-8
Ogawa, K., & Wan, J. (2007). Household debt and consumption: A quantitative analysis based on household micro data for Japan. Journal of Housing Economics, 16(2), 127–142. https://doi.org/10.1016/j.jhe.2007.02.001
Pavan, M., & Barreda-Tarrazona, I. (2020). Should I default on my mortgage even if I can pay? Experimental evidence. Journal of Economic Dynamics and Control, 110, Article 103733. https://doi.org/10.1016/j.jedc.2019.103733
Poterba, J. M. (2000). Stock market wealth and consumption. Journal of Economic Perspectives, 14(2), 99–118. https://doi.org/10.1257/jep.14.2.99
Sheiner, L. (1995). Housing prices and the savings of renters. Journal of Urban Economics, 38(1), 94–125. https://doi.org/10.1006/juec.1995.1024
Sun, X., Su, Y., Liu, H., & Li, C. (2022). The impact of house price on urban household consumption: Micro evidence from China. Sustainability, 14(19), Article 12592. https://doi.org/10.3390/su141912592
Survey Research Data Archive, Directorate-General of Budget, Accounting and Statistics, Executive Yuan. (2019). The survey of family income and expenditure, 2018. Academia Sinica. https://doi.org/10.6141/TW-SRDA-AA170043-1
Wachter, J. A., & Yogo, M. (2010). Why do household portfolio shares rise in wealth? The Review of Financial Studies, 23(11), 3929–3965. https://doi.org/10.1093/rfs/hhq092
Xie, Y., & Jin, Y. (2015). Household wealth in China. Chinese Sociological Review, 47(3), 203–229. https://doi.org/10.1080/21620555.2015.1032158
Yuan, D.-M., Liu, J.-J., & Yang, Q. (2011). Empirical study on the influence of the rising housing price on resident consumption. International Conference on Management and Service Science (pp. 1–4), Wuhan, China. https://doi.org/10.1109/ICMSS.2011.5998436