Immigration won’t rescue plunging New Zealand housing market

I reported yesterday how the Ardern Government in New Zealand announced some tweaking to the immigration system that will ensure Kiwi businesses have easy access to migrant workers.

These changes will also give easy access to permanent residency, thus ensuring that New Zealand’s population continues to grow.

For all intents and purposes, the Ardern Government’s reforms are effectively a continuation of the former Key/English Government’s mass immigration policy, which saw New Zealand’s population swell last decade.

Despite these changes, Westpac believes that New Zealand’s immigration intake will only rebound to half of its pre-COVID level which, when combined with elevated dwelling construction rates, means that the nation’s chronic housing shortages should end mid-decade. This elimination of housing shortages, in turn, will relieve pressure on house prices:

Population pressures are one factor that has contributed to the strong rise in New Zealand house prices in recent years…

The closure of our borders has seen population growth plummet at the same time as home building is hitting record levels…

Between 2015 and 2020 New Zealand’s population grew by around 11%. Over that same period our housing stock only increased by 7%. That left us with around 75,000 too few homes…

Shortages of housing have been most intense in Auckland. However, they have become increasingly widespread across the country, with the average number of people per dwelling rising sharply in nearly every region over the past decade…

That huge imbalance between population pressures and housing supply that developed over the past decade has undergone a rapid transformation in the wake of Covid-19. We estimate that since the start of the pandemic, the shortfall of housing has fallen by around 30,000 homes. That still leaves us with a shortfall of around 45,000 houses. However, further big changes are in train in terms of both housing demand and supply…

Over the next five years, New Zealand will need to build around 130,000 new houses to address the existing shortfall and keep up with the needs of our growing population. That’s equivalent to building 26,000 new homes a year…

Between 2015 and 2019 net migration averaged around 60,000 people per annum. But over the past year that story has gone into reverse, with the country actually recording a net outflow of 7,600 people in the year to February.

We expect that net migration will remain negative for some time yet, as many young New Zealanders who put off OEs in recent years are now looking to travel again as conditions abroad have improved.

Longer term, net migration will (eventually) turn positive again as the current pent-up demand for overseas travel by New Zealanders eases back to more normal levels. In addition, with the borders opening up again, the coming years will see a pickup in the number of new migrants landing on our shores.

Even so, we don’t expect a return to the sorts of migration levels that we saw over the past decade… We expect that net migration will settle at around 30,000 people per annum. That’s a big step down from the annual inflows of 50,000 to 60,000 people per annum that we saw in the years leading up to the pandemic. And the impacts of that change will be felt across the economy, including in our housing market…

The combination of rapid home building and slower population growth means… the shortages that built up in recent years are now being rapidly eroded, and they are set to be largely eliminated by the middle of this decade…

Now, with population growth taking a step down and the previous shortages of homes being eroded, we don’t expect that population pressures will provide the same boost to prices going forward that they did in previous years.

In its separate “Home Truths” report, Westpac forecast a 10% fall in New Zealand house prices this year, followed by a further 5% decline in 2023. With New Zealand inflation running at around 6% annually, this would imply a peak-to-trough decline in real house prices of up to 25%.

Obviously, interest rates are the main driver of New Zealand house prices. Nevertheless, if immigration fails to return to its manic pre-pandemic level and supply shortages evaporate, it will be another headwind for the nation’s property market.

Unconventional Economist


  1. kiwikarynMEMBER

    Immigration is going to go through the roof! Reasons:
    – there is no cap on the number of immigrants allowed in under the new work and residency visa process
    – companies no longer have to advertise jobs and prove that there are no Kiwi workers available, they can import as many workers as they like now
    – everyone is practically guaranteed permanent residency now, so that will make NZ a favourable destination compared to places that make it harder to get residency.
    – partners of those with work visas also get automatic work rights.
    – and finally, it looks like its open slather on the family reunification visas as well.

    • This sounds exactly like what Labor have planned here. They were meant to have another two announcements regarding Immigration for Parents of migrants and probably around Australia not being a guest worker state, ie all temporary visa holders will be eligible for permanency.. They know the media aren’t interested so they probably think why bother risk losing votes by making the announcements.

  2. Leroy Huggins

    There is something utterly disgusting about people being entrusted a land, and then giving it away to others (for wealth, or feels, or because doing otherwise requires having a backbone). A breach of a sacred trust with nature, one’s ancestors, and one’s descendants. Pure decadence and selfishness.

    • kiwikarynMEMBER

      Mate, you’re gonna end up with all the “old” Kiwis who came home to enjoy the “rockstar economy” only to find it all turned to custard after a few years of a Labour Govt.

  3. Hugh PavletichMEMBER

    ASB (Bank) picks 20% house price fall, biggest drop since 1970 … Susan Edmunds … Stuff NZ

    ASB is warning that house prices could drop 20% from their peaks, when adjusted for inflation. …

    … An increase in supply of new houses was also helping to depress prices, the economists said.

    “We expect additional housing supply to come on stream ahead. We’re now five years into a residential construction boom, and this supply bulge should increasingly show up n higher inventory and new listings numbers.

    “The housing shortage that has plagued the market over the past five years has been rapidly …, if not completely, eroded thanks to new construction outpacing plunging population growth. … read more via hyperlink above …
    Compare New Zealand’s ‘consent / approval rate per 1000 population per annum’ … and trend going forward … with other counties within the developed world … New Zealand is way way ahead.

    Australia and New Zealand new dwelling approvals / consents: Adjusted for respective population bases New Zealand outstrips Australia by wide margin of 78 % for March 2022.

    For the month of March 2022 the Australian Bureau of Statistics reports 15,183 new dwelling approvals (x12 annualized 182,196) … Statistics New Zealand reports 5.303 (x12 annualized 63,636).

    The current population clock for Australia is 25.884 million … New Zealand 5.164 million.

    Specifically for the month of March … the consent rate per 1000 population per annum for Australia was 7.04 … New Zealand 12.52.

    For the month of March on aa appropriate population adjusted basis, New Zealand’s new dwelling consents / approvals were 78% ahead of Australia’s …

    Building Approvals, Australia March 2022 … Australian Bureau of Statistics

    Building consents issued: March 2022 … Stats New Zealand

    … extract …

    … New dwellings consented per 1,000 residents

    The number of dwellings consented per 1,000 residents across New Zealand was 9.9 for the year ended March 2022, compared with 8.0 in the year ended March 2021. The record number of new homes consented per 1,000 residents was 13.4 in the year ended December 1973.

    National population estimates are updated quarterly, and subnational population estimates are updated annually in October and both are provisional. For more information about estimated resident population see Population.
    Note important historical ‘consents rate per 1000 population per annum’ graph from September 1971 below …

    Rise in new homes consented per 1,000 residents … Statistics New Zealand

  4. The same will happen here. Labor have already foreshadowed giving out more Permanent visas rather than having a ‘guest worker state’ They are also giving 4 year visas to Pacific Islanders and their families who come to work on farms and in abbatoirs which apparently provides them a pathway to a permanent visa. Get ready for everyone to get permanent visas or four year pathway visas.

  5. Nice of them to tell us the obvious… I was informing my clients of this back in December when the CCCFA was passed. Amazingly, only BNZ is making the connection between a major fall in real house prices and economic activity.

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