Household Debt and Housing Price: An Empirical Study across 36 Countries

This paper investigates the effect of the change of household debt ratio (household debt to GDP) on national housing price by using unbalanced panel data in 36 countries during 1981-2015. We employ Two Stage Least Square and GMM method to analyze the fixed effect model, after controlling the demand, supply, other assets prices and endogeneity. Our findings are that household debt ratio and housing price are positively significantly related. Household debt ratio promotes the growth rate of housing prices. The findings remain robust by separating countries into two groups, European countries and non-European countries, and using nominal housing price as explanatory variable.