Abstract: Based on a general equilibrium model of economic structural changes, this paper tries to distinguish the income effect and substitution effect of housing price on households’ consumption expenditure; then it makes use of the data of China Family Panel Survey to study the impact of housing prices on households’ consumption expenditure. The findings show that, from the overall urban sample data, it can be seen the housing price has a positive effect on households’ consumption expenditure, and there is no sign of negative effect. However, when the heterogeneity of households’ income is considered, there are significant differences between the impact of housing price on the consumption expenditure of the families with lower or higher incomes and the impact on the consumption expenditure of the families with middle income. The consumption expenditure of the middle income families is mostly twisted by the impact of housing price. When households’ expectation of housing price is considered, the expectation of housing price has negative impact on households’ consumption expenditure, namely, to squeeze the households’ consumption expenditure, which indicates that what twists households’ consumption expenditure is not housing price itself, but expectation of housing price.

Key words: housing price; consumption expenditure; income effect; substitution effect