Excess construction expressed as a percentage of GDP

[yoganmahew]

Saw this article in the SanFran Chronicle
sfgate.com/cgi-bin/article.c … ss.opinion
(Thanks someassemblyrequired).

At the bottom is has these figures from the Centre for European Policy Studies expressing excess construction as a percentage of GDP:

U.S. 7.1
Germany 6.5
Spain 24.6
Ireland 44.3

What I think it means is that we’ve built too many houses to the tune of 44.3% of GDP (thank goodness they didn’t use GNP). Even if it doesn’t mean that, it still looks really bad!

[Open_Window]

and double

[the_edge]

Almost twice as bad as Spain. And Spain are very, very bad. Bloody heck.

[the_edge]

@Open Window

:shock: and double

Don’t be so negative, we’re number ONE again!!!

Go team!!!

[2Pack]

@yoganmahew

What I think it means is that we’ve built too many houses to the tune of 44.3% of GDP (thank goodness they didn’t use GNP). Even if it doesn’t mean that, it still looks really bad!

*Its the empties stoopid *

But nicely put, anyone got linkees to the original report so that I can critique it just a tad ??

[Green_Bear]

@2Pack

@yoganmahew

What I think it means is that we’ve built too many houses to the tune of 44.3% of GDP (thank goodness they didn’t use GNP). Even if it doesn’t mean that, it still looks really bad!

*Its the empties stoopid *

But nicely put, anyone got linkees to the original report so that I can critique it just a tad ??

Table on pg 13.

Bubbles in real estate? A Longer-Term Comparative Analysis of Housing Prices in Europe and the US
shop.ceps.be/downfree.php?item_id=1545 [adobe acrobat required]

[yoganmahew]

We’re going to have to rename GB the mailman!

[Green_Bear]

@yoganmahew

We’re going to have to rename GB the mailman!

Have I been typecast.

[2Pack]

On Page 15

The experience of Germany and Japan shows that a real estate boom can leave a long-lasting
legacy if the boom leads to a housing ‘overhang’, i.e. if simply too many houses are built. **Given
that buildings depreciate very slowly, a housing overhang can lead to a long-term weakness in
construction activity. **

In Germany, for example, a combination of higher prices and very strong
government subsidies led to an extraordinary expansion of the construction sector in the years
following unification. At its peak (1995), construction activity amounted to 14.5% of GDP, and
over the next ten years it then fell back to a little above 8.5% of GDP. In Germany the fall in
demand thus amounted to close to 6% of GDP.

This is expanded on page 16

In determining whether a housing boom has also led to a housing ‘overhang’ one has to take
into account the time dimension. One or two years of a high rate of construction are not
sufficient to create a substantial excess supply of housing. A housing overhang can thus be
created only by a prolonged period of high investment. This paper proposes the following rough
approach to calculate whether the housing boom has led to an overhang of available homes is to
calculate the stock of ‘overinvestment’ in the following way: for each year one calculates the
difference between the previous 20 year average and the actual value. The annual values of the
differences (actual minus previous average) are then summed over the entire period: 2001-07.
This calculation is done using both the narrow definition of construction of dwellings, i.e. home
building, and overall construction. Both variables are measured as a % of GDP. This indicator
can be thought of as a measure of the cumulated loss in domestic demand (compared to the last
7 years) that would result if construction activity to return to its longer-run norm. If this total is
to be reached in a short time, say five years it would mean, in the case of Spain that demand for
dwellings could drop by an amount worth 5 % of GDP and then stay at the lower level for the
remainder of the adjustment period. Alternatively, as suggested by the German experience, the
short term drop in growth could be smaller, but much more persistent.
It is apparent that two extremes co-exist in euroland. Spain (and even more so, Ireland)
experienced a building boom that has led to an accumulated ‘excess’ equivalent to 30% of GDP
if one looks a overall construction and only a little less, namely 25% of GDP if one looks at
pure home-building. By contrast, in the other two large euro area countries with high housing
prices, namely France and Italy, the supply response seems to have been sluggish: in both cases
the 5-year average of actual building activity has been below the longer-run average (although
lately it has risen somewhat).

[markf909]

Why dont we export some of our surplus housing stock to France and Italy?

[Calina]

Housing market in France isn’t so healthy either. You’ll need to find somewhere that has a chronic shortage of housing. Sardinia or something I read somewhere else.

Would sort out our economic woes big time if we could just lift Adamstown The Paddocks completely and entirely and dump it on a Mediterranean island.

[2Pack]

The most damning bit is on Page 22, it restates a long held view by many of the Pins Residents.

For the n00b I will state my version of it.

The Housing Boom from 1995-2000 was characterised by

1. Tumbling interest rates as the € approached
2. High levels of immigration / de-emigration by the Irish themselves.
3. Rents rising in tandem with house prices .

The Housing Boom from 2002-2007 was characterised by

1. Rents being static, indicating no real demand for all these homes
2. Ultra high levels of output into a speculative market ,.
3. Despite the holding back of much marketable supply by speculators, the Empties Stoopid bit, rents STILL did not rise.

Therefore the 2002-2007 boom was built on shifting sands. This turned out to be easy credit which has now been withdrawn , thereby leading to what I hope is a rapid deflation of the bubble and a return to sustainable patterns of production and usage of housing …bar in the *Midlands Ghost Estate Belt *where systemic retirement of stock must be considered.

This paper has concentrated on the price/rent ratio as an indicator of overvaluation of housing
since any change in the demand for housing (e.g. immigration) should be reflected in both
prices and rents.

However, over the last decade, the price/rent ratio has increased in parallel with
the price of housing as rents have in general not increased by more than the overall consumer
price index. This suggests that the current level of house prices does not simply reflect a higher
demand for housing.

[Open_Window]

@markf909

Why dont we export some of our surplus housing stock to France and Italy?

I broke that story ages ago on the pin, look a picture to remind you! A whole new manufacturing export market…

[gaius]

France overpriced? The country that features in the Irish Times “Take 5” piece in comparison to Irish houses almost every week? 14 bed chateau versus 3 bed in Stillorgan, etc… Say it ain’t so!

[CelloPoint]

@Open Window

@markf909

Why dont we export some of our surplus housing stock to France and Italy?

I broke that story ages ago on the pin, look a picture to remind you! A whole new manufacturing export market…

https://i153.photobucket.com/albums/s214/propertypin/Bertie_Boat_000.jpg

Is that Batt O’Keefe on the bow?

[kerrynorth]

@CelloPoint

@Open Window

@markf909

Why dont we export some of our surplus housing stock to France and Italy?

I broke that story ages ago on the pin, look a picture to remind you! A whole new manufacturing export market…

https://i153.photobucket.com/albums/s214/propertypin/Bertie_Boat_000.jpg

Is that Batt O’Keefe on the bow?

No, Batt got off that ship last Wednesday to another berth (any port in a storm?). A new Captain is being appointed tomorrow but he/she will not be able to turn the ship around before it hits the rocks.