April migrant growth could mean good news for property market

May 26, 2009

A migrant-driven boost for the New Zealand property market is being tipped by economists studying new visitor arrival numbers just released. Statistics New Zealand released immigration and visitor data showing permanent and long-term arrivals exceeded departures by 400 in April, compared with a net outflow of 1,300 in April last year. The increase was mainly due to 1,600 fewer long term departures of New Zealand citizens. New Zealand's annual net migration balance was a gain of 9,200 in the April 2009 year, up from 4,700 in the April 2008 year. While the number of Kiwis leaving these shores for good has fallen, the number returning home to live has only increased slightly - with 24,500 in the April 2009 year, just above the annual average of 23,400 seen for the 1979-2008 December years. New Zealand Strategist for Goldman Sachs JBWere Bernard Doyle said the migration upswing continued to be driven by a plunge in permanent departures " no doubt indicative of the lack of pull factors in international labour markets currently." At 25,000 a year , net migration was now at levels not seen since 2004, said Doyle. "We are conscious that net migration was one of the key drivers behind the 2003-2007 economic upswing, and was particularly important for the construction sector. "Accordingly the longer net migration persists around these levels, the more optimistic we become on prospects for the domestic economy." Jane Turner ASB economist said the turnaround in migration over the past few months had been swift and was likely to continue to rise. "The rapid pick-up comes as departures have fallen dramatically, in particular, departures to Australia," she said. "Australia has not been immune to the global economic downturn and has seen unemployment pick up roughly in line with NZ. With the grass no longer greener across the Tasman, more NZers are opting to stay home." There was an increase in long term migrants coming from Australia - likely to be Kiwis returning home. Turner said that while the pick up in net migration had been well anticipated since the financial crisis intensified last September, the turnaround over the past few months had been swift, and she expected the trend to continue. "Overall, we expect that annual net migration is likely to peak at around 20,000 towards the end of this year, which is a fairly modest rise compared to previous net-migration cycles," she said. "The boost to the population will help provide some timely support for the retail and housing activity, helping to curb the recent fall in demand. " Robin Clements, senior economist at UBS New Zealand also the increased migration gains had come more quickly than expected. This couldn't be more timely, he said, as it would provide additional demand for the struggling housing sector. "This should reinforce the already evident turning point for house sales and what ought to be a similar turn in building consents." Darren Gibbs, an economist at Deutsche Bank said that looking ahead,"in light of the deep recession and job losses being experienced in most key trading partners, we continue to think that New Zealand will experience sustained and strong net migrant inflows over the next three years." " If history is any guide, strengthening migrant inflows will play an important role in reinforcing what many (including the Reserve Bank) will view as a surprisingly strong recovery in housing activity," said Gibbs. "Importantly, today's data makes it more likely that the housing market will sustain the sorts of activity levels (or better) that appear to have stabilised house prices in recent months."