Housing Wealth Effects: Evidence from an Australian Panel

Callan Windsor, Jarkko P. Jääskelä and Richard Finlay

Economica, 2015, vol. 82, issue 327, 552-577

Abstract: type="main" xml:id="ecca12137-abs-0001">

We explore the positive relationship between house prices and household spending by following a panel of Australian households. No evidence for ‘traditional housing wealth effects' is found, with young homeowners exhibiting the largest wealth effects. Young renters also exhibit a positive consumption response to house prices, although less so than young homeowners. This suggests that increasing house prices raise spending via easing credit constraints and a common association between house prices and a third factor. Results from a cohort-level panel are similar to those using household-level data, suggesting that ‘pseudo-panels' may be used as a partial substitute for actual panels.

Date: 2015
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