Housing Wealth Effects: Evidence from an Australian Panel

Abstract

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.