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Past research on the impact of international migration on house prices: Implications for Auckland

While conducting a strategic review of the New Zealand immigration system in terms of assessing its contribution to economic growth, the Ministry of Business Innovation and Employment (MBIE) noted that “some people are of the view that increases in net migration are impacting the housing market and infrastructure, especially in Auckland……” and that “at this point in time, there is no conclusive evidence supporting these concerns….”. While MBIE has done some recent work in this area, the focus has tended to be on New Zealand as a whole. MBIE wanted therefore to advance this work with a specific focus on the impact of net international migration (usually measured as the difference between permanent and long term (PLT) departures and PLT arrivals) and, where possible, visa-controlled immigration (i.e. the numbers of people granted temporary or permanent visas) on the Auckland housing market. To this end MBIE engaged the University of Waikato to produce a concise review of the conclusions that can be drawn from the recent international and New Zealand literatures regarding the impact of net international migration on housing markets. The emphasis is of course on conclusions that would be relevant for, or that can be directly applied to, the Auckland housing market. This note provides this concise review of the literature. Trends in relevant core statistical indicators are also provided. To focus the review, the following six hypotheses were considered (our conclusion concerning the veracity of the hypothesis in terms of available evidence in the literature is stated in bold): 1. The decrease of New Zealanders leaving in recent years, due to relatively strong economic growth and a subdued Australian economy, has had a bigger impact on rising house prices in Auckland than the growing number of migrants settling in Auckland. 𝐒𝐮𝐩𝐩𝐨𝐫𝐭𝐞𝐝 2. The contribution of the inflow of Australians and of returning New Zealanders to population growth in Auckland has had a bigger impact on house price increases than other permanent and long-term (PLT) arrivals. 𝐈𝐧𝐜𝐨𝐧𝐜𝐥𝐮𝐬𝐢𝐯𝐞 3. Current and recent (5 years previous) net international migration trends (considering both PLT arrivals and departures) have had a minor impact on the Auckland housing market, relative to other factors. 𝐒𝐮𝐩𝐩𝐨𝐫𝐭𝐞𝐝 4. Investor migrants are not having a disproportionate impact on the Auckland housing market as they are purchasing largely commercial property or a single individual residence. 𝐒𝐮𝐩𝐩𝐨𝐫𝐭𝐞𝐝 5. Until comprehensive data become available on country of residence of buyers and sellers at the time of a sale, it cannot be established conclusively that offshore investors drive up house prices in particular areas in central Auckland. 𝐒𝐮𝐩𝐩𝐨𝐫𝐭𝐞𝐝 6. Given the above and the time lags between immigration policy changes and impacts, it is unlikely to be useful to make changes to immigration policy to dampen Auckland house prices. 𝐒𝐮𝐩𝐩𝐨𝐫𝐭𝐞𝐝 Overall we find that the literature and the available data on population change suggest that visa-controlled immigration into New Zealand, and specifically into Auckland, in the recent past has had a relatively small impact on house prices compared to other demand factors, such as the strongly cyclical changes in the emigration of New Zealanders, low interest rates, investor demand and capital gains expectations. Consequently, changes in immigration policy, which can impact only on visa-controlled immigration, are unlikely to have much impact on the housing market.
Type of thesis
Cochrane, W., & Poot, J. (2016). Past research on the impact of international migration on house prices: Implications for Auckland (Report) (pp. 1–34). Wellington, New Zealand: Ministry of Business Innovation and Employment (MBIE).
Ministry of Business Innovation and Employment (MBIE)
Commission Report for Ministry of Business Innovation and Employment (MBIE). Used with permission.