- Title: Mr
- Position: PhD Student - Department of Economics
- Principal supervisor: Prof Jeffrey Sheen
- Associate supervisor: Mr Ben Wang
- Date of submission: 01/01/2000
- Thesis title: House price and consumption
- Abstract: Over the last decade, the growth of house price and consumption has been closely synchronised. Three main hypotheses for this co-movement have been proposed in the literature. First, that an increase in house prices raises households’ wealth, particularly for those in a position to trade down the housing ladder, which increases their desired level of expenditure. Second, that house price growth increases the collateral available to homeowners, reducing credit constraints and thereby facilitating higher consumption. And third, that house prices and consumption have tended to be influenced by common factors. This paper investigate the relationship between house price and consumption by using data from HILDA (Household, Income and Labour Dynamics in Australia) survey over the period 2003 to 2012.This paper finds that the relationship between house prices and consumption is stronger for younger than older households, which appears to contradict the wealth channel and increasing house price has negative effect on the consumption of renters, which contradicts the common factors channel. These findings therefore suggest that credit constraints channel has been the most important factor behind the link between house price and consumption in Australia.