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The Effects of Regional House Prices on Consumption in Korea: Heterogeneous Behaviors According to Homeownership Status and Lifecycle Stage

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  • Jong Chil Son

    (Division of Economics, Hankuk University of Foreign Studies, Seoul 02450, Korea)

  • Hail Park

    (Department of International Business and Trade, Kyung Hee University, Seoul 02447, Korea)

Abstract

This paper investigates the effects of regional house prices on consumption growth, with a focus on heterogeneity across homeownership statuses and lifecycle stages, using household-level panel data in Korea from 2004 to 2017. The empirical estimation results indicate, firstly, that the growth of regional house prices has overall positive effects on consumption growth in the full sample including homeowners and renters. Secondly, house prices have significant and large effects on consumption growth for homeowners, while the effects are sharply reversed for renters, being weakly negative. Thirdly, the sensitivity of homeowners’ consumption in response to house prices differs across different stages of the lifecycle. The consumption sensitivity is greatest in the old age cohort for the sample covering the owners of single and multiple homes. When using a subsample of only single homeowners, however, the young cohort turns out to have the highest sensitivity, implying that young single homeowners face high borrowing constraints and expected income volatility. Finally, renters’ consumption sensitivity in response to house prices becomes more negative over the lifecycle.

Suggested Citation

  • Jong Chil Son & Hail Park, 2020. "The Effects of Regional House Prices on Consumption in Korea: Heterogeneous Behaviors According to Homeownership Status and Lifecycle Stage," Sustainability, MDPI, vol. 12(9), pages 1-15, April.
    • Handle: RePEc:gam:jsusta:v:12:y:2020:i:9:p:3517-:d:350342
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    References listed on IDEAS

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    Cited by:

    1. Ming-Chu Chiang & I-Chun Tsai, 2020. "Importance of Proper Monetary Liquidity: Sustainable Development of the Housing and Stock Markets," Sustainability, MDPI, vol. 12(21), pages 1-20, October.
    2. Xiaoqin Sun & Yuhai Su & Honglei Liu & Chengyou Li, 2022. "The Impact of House Price on Urban Household Consumption: Micro Evidence from China," Sustainability, MDPI, vol. 14(19), pages 1-20, October.
    3. Zhou, Qiuyang, 2024. "Does the digital economy promote the consumption structure upgrading of urban residents? Evidence from Chinese cities," Structural Change and Economic Dynamics, Elsevier, vol. 69(C), pages 543-551.

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