GDP / GNP calculation

[Markjbloggs]

Not sure if this is the correct forum for this, but here goes - are house prices factored into Irish GDP / GNP calculations? If so, what is the % contribution to the overall figure?

Politicians / economists always point to the GDP growth numbers as vindication of the success of the Irish economy. If these numbers were in some part a figment of a property/credit bubble, have we been deluding ourselves as to how well we have done?

 

[Protocol]

GDP and GNP are measures of our national income.

Income earned from the construction of new buildings is included, yes.

Buying and selling of existing property has no direct effect on income figures.

 

[Markjbloggs]

GDP and GNP are measures of our national income.

Income earned from the construction of new buildings is included, yes.

Buying and selling of existing property has no direct effect on income figures.

So the "value" of existing property is not factored in? Does that mean that all
assets (property, stock, land) are not a factor?

 

[Remix]

House building is a factor.

The usual number bandied about is every 10,000 fall in the number of houses built reduces GDP by about 1pc.

 

[Markjbloggs]

House building is a factor.

The usual number bandied about is every 10,000 fall in the number of houses built reduces GDP by about 1pc.

Is it more correct to say that the 10,000 drop in houses built reduces GDP GROWTH by 1%. Once they are built, the appreciation in "value" does not contribute to growth in GDP?

 

[PMU]

You can get a good explanation on the CSO web site:
[broken link removed]

Note that GDP and GNP measure income not value.

In most countries, GDP and GNP are about the same; in IE because of the amount of foreign direct investment our GDP is greater than our GNP.

 

[Protocol]

Expenditure on new buildings, including houses, is a part of GDP.

Think about it, that expenditure is somebody else's income (income for builders, tilers, roofers, suppliers of glass and concrete, etc.)

But any subsequent rise in the value of an asset is not income.

You could argue that rising asset prices harm our economy, as they encourage excessive investment expenditure on construction.


If fewer new houses are built, yes, GDP may not grow by as much as last year, i.e. incomes will not grow as fast.

 

[MichaelDes]

House building is a factor.

The usual number bandied about is every 10,000 fall in the number of houses built reduces GDP by about 1pc.

England House Completions - 2007 - 173,000 est. with a Population of 56m

Ireland House Completions - 2007 - 78,000 est. with a Population of 4m

Comment - UK market dying on its knees due to many factors amongst others oversupply. If we correlate UK to Ireland we should need 12,000 dwelling. Affect if any on GDP 78000-12000= 66,000 to many. GDP should be in real terms -6.6% full percentage points lower. Turn off the lights last one out.

 

[messyleo]

Is it more correct to say that the 10,000 drop in houses built reduces GDP GROWTH by 1%. Once they are built, the appreciation in "value" does not contribute to growth in GDP?

1 percentage point, i believe, rather than 1 per cent