The Bank for International Settlements published a working paper using Alipay transaction data to estimate how changes in house prices affect household consumption in China, finding a statistically significant housing wealth effect in Tier 1 and Tier 2 cities but not in smaller Tier 3 and Tier 4 cities. Using monthly transactions covering January 2017 to March 2023 across 99 cities, the paper estimates that in Tier 1 and Tier 2 cities a 10% increase in house prices is associated with a 1.6% increase in future consumption (about 1.8% when reweighted to match China’s age and gender distribution). The effects are stronger among older households and homeowners, while renters show no significant response; in Tier 3 and Tier 4 cities, average effects are not statistically significant and higher house prices tend to crowd out consumption among younger households. Robustness checks using an additional random sample of Alipay users and city-level aggregation reported similar tier-specific patterns.
Bank for International Settlements 2025-12-02
Bank for International Settlements research finds a 10% rise in house prices lifts consumption 1.6% in China’s Tier 1 and Tier 2 cities
The Bank for International Settlements released a working paper analyzing Alipay transaction data to assess the impact of house price changes on household consumption in China. The study found a significant housing wealth effect in Tier 1 and Tier 2 cities, with a 10% rise in house prices linked to a 1.6% increase in consumption, particularly among older households and homeowners. In contrast, Tier 3 and Tier 4 cities showed no significant effects, with higher prices potentially reducing consumption among younger households.