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Journal Article

House price shocks, negative equity and household consumption in the United Kingdom

Authors

Publication date

2010

Abstract

We examine the impact of unanticipated housing capital gains on consumption behaviour using data from the British Household Panel Survey and county- level house price data. We condition the models on household financial expectations and on household real financial capital gains imputed from the Family Resources Survey. We find a marginal propensity to consume out of unanticipated shocks to housing wealth of 0.01. Omitting the measure of financial expectations biases the results upwards. We find little evidence of heterogeneity in responses of young and old homeowners, but differences between owners and renters. We also find asymmetric behaviour between house price rises and falls, and a disproportionate impact on saving if the household had negative housing equity at the start of the period.

Published in

Journal of the European Economic Association

Volume

8 (6):1179-1207

DOI

http://dx.doi.org/10.1162/jeea_a_00022

Links

http://serlib0.essex.ac.uk/record=b1599819~S5

Notes

Wiley alert; Albert Sloman Library Periodicals *restricted to Univ. Essex registered users*

#513262


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