Household Spending Increases by 5.2% After Home Purchase... "Rise in Household and Food Purchases"

BOK Research Results on the 8th: "Impact of Housing Purchase Prices on Household Optimal Consumption Path"
"Increase in Both Durable and Non-Durable Goods Consumption"

[Image source=Yonhap News]

[Asia Economy Reporter Jang Sehee] An analysis has revealed that consumption after purchasing a house increases by about 5.2% compared to before.

According to the Bank of Korea's BOK Economic Research report titled "The Impact of Housing Purchase on the Optimal Consumption Path of Households" released on the 8th, consumption after purchasing a house was about 5.2% higher than before.

The report stated that housing purchases may affect consumption by accompanying additional durable goods expenditures while alleviating the previously contracted consumption of nondurable goods. In particular, consumption in the food sector within nondurable goods was analyzed to have increased. However, variables such as loan repayments were not considered in this study.

This study utilized a simple two-period model under mild assumptions about the economic situation. It also analyzed dynamic changes in household nondurable consumption based on the timing of housing purchases using the Korea Labor Panel from 1999 to 2016.

Through the period model analysis, it was predicted that households have incentives to reduce consumption before purchase in order to buy a house in the future.

Jung Dongjae, a senior researcher at the Bank of Korea Economic Research Institute, stated, "This study is expected to enhance understanding of household lifetime consumption patterns and draw attention to new channels through which demographic changes and housing market cycle changes may affect consumption cycles in the future."

Senior researcher Jung also predicted that if the timing of housing purchases is delayed due to rising real estate prices, consumption may be partially constrained. He said, "In situations without complex correlations, if housing purchases are delayed, the consumption cycle may also be delayed."

This content was produced with the assistance of AI translation services.