Question

The following questions require you to determine answers (approximately 100 to 150 words) based on given, data and/or scenario:

Explain why the purchase of new and existing houses are not included in the “consumption expenditure” component of GDP.

Answer 1

Both are components of the aggregate  expenditure. The house is considered a lasting investment.
           The simplest answer is that buying a home is considered consumption. This can make sense because a home is an end asset that a customer uses for their own purposes. Most people have traditionally bought a home and lived there for several years, starting a family or pursuing a career. Usually depending on how long it has been held and the market conditions in which it is sold, it is generally worth more than what was bought, making it an investment. The recent market crash has hit hard, but housing, like all investment, will rise and fall based on demand and economic hardship.

A house is hardly used to produce anything and is usually a final good. Therefore, it is not generally considered an investment in this sense of the term.
A house produces a flow of housing services. Therefore, a house can be considered a capital asset. And so buying a home can be considered an investment.
Buying a newly built home contributes directly to total output (GDP).
. Buying and selling existing homes does not affect GDP in the same way. However, the costs associated with a home transaction still benefit the economy. Buying an existing home does not increase the amount of capital resources in the economy, so it is not an investment. Which means it is not considered consumption expenditure