A report by Westpac says net population growth from migration will drop from over 70,000 a year currently to around 10,000 a year by 2021, which will reinforce downward pressure on house prices.
Entitled They came, they saw, they're leaving, the report by Westpac senior economist Satish Ranchhod says a downturn in migration was underway even before the new Labour-led government is able to tighten migration settings.
"And expected policy changes will reinforce recent trends," Ranchhod says.
"We expect lower net migration will see population growth slow from over 2.1% per annum to 0.8% by 2021."
Ranchhod says this will have some significant impacts on the economy.
"First, it will remove an easy source of demand growth that businesses have enjoyed in recent years.
"It's much easier to increase revenues in an environment where the population is expanding rapidly," he says.
And the housing market will be particularly affected.
"Lower migration is one of several upcoming policy changes that we expect will result in very weak house price inflation over the coming years," the report says.
"The fall in migration will also reduce the upwards pressure on rents.
"In terms of construction, going forward we won't see the same sort of large increases in demand that we have in recent years.
"In Auckland, demand for housing will remain strong.
"However, it will be a very different story in many other regions that aren't wrestling with significant shortages of housing.
"In fact, in some regions, slower population growth could mean that construction levels fall over the coming years," Ranchhod says.
102 Comments
"That signals a huge reduction in the economy’s rate of potential GDP growth and is a key reason
why we expect lower GDP growth over time"
Which is why mortgage rates ( and wage increases!) are going to 'zero'!
From Notes at the end of the Report:
" ¹ Other policy changes that will affect house prices include the extension of the ‘bright line’ test for taxing capital gains and the removal of the ability to write-off losses on rental properties against personal incomes"
Quite right!
I couldn’t care who governs, so long as they’re competent.
The jury is still out with this lot as they have back flipped on just about every policy plank they electioned on.
Like most folk I think the state of our housing market is a mess.however I don’t subscribe to the view that we should cut immigration because it’s the route of all evil either.
pouring $400m into offering free tertiary education when 95% could afford the fees anyway is right on the money eh Didge.
What else? Infrastructure. Oh yeah lets build a tram to the airport. That makes perfect sense when you're trying to get mum, dad and kids on with all your luggage. Genius
Immigration is like many things: great in moderation but bad in extreme. We have the highest legal immigration in the world and infrastructure is creaking badly and those in low-paid jobs are suffering. The wealthy (property owners) are getting wealthier but the poor are being kicked in the face. If all the immigrants were truly highly skilled it would be OK - not just a temporary boost for the government tax income. No immigration and you get North Korea or Afghanistan.
No immigration and you get a very stable predictable lifestyle. No volatility. Cities develop their needed infrastructure. Housing is predictable and prices settle to true value. The wealth gap between rich and poor closes up. Less opportunity for risk takers. The lifestyle becomes conservative and for some a bit boring.
Migration doesn't mean Chinese or Indian - it is only polite to apply it to your own origins (my family is UK & Melanesian). No problem with a few more of either POMs or PIs nor more Chinese, Indians, Africans, etc so long as we are talking a gentle sprinkling like a refreshing shower of rain not a bloody flood.
Dear lord, what would people say if there was an ethnically Asian UK citizen, (quite common in the UK, US, Aus, Europe in fact in most corners of the globe). The reverse would blow the minds then an ethnically British Indian citizen. The ethnicity is not the relevant factor, the citizenship, skills, visa purpose/status, refugee status, medical status, financial status, criminal status and related family are relevant in immigration success. Even then regardless of all those the number inward is too high for infrastructure and the economy to weather it long term. It is a ponzi scheme with us all going down. Those most vulnerable taking the hits first. It is life and death to many and unfortunately many have died already due to the levels of service degradation and resource stress. The longer it continues the more serious the effects on wider proportions of our society, (which includes those migrated from a long time ago to those more recent). I wish gene testing to show wide migration and genetic group mixing was done in schools so that we can recognise that all pasts are mixed and it then becomes a resource and infrastructure management discussion, (which is the issue with high migration currently, not what culture people identify as).
You could show Bobster hes wrong by saying how you do it. But until than its just words on an internet forum. Those words backed up against current market conditions people will draw conclusions.
If you can make 8-10% you could actually scale your business model and go worldwide, ask people for subscriptions and guarantee their money.
Then you could be a gobal player.
Alternatively if it is that easy maybe you can just borrow hundreds of millions as your guaranteed to make profits and its absolutely no risk whatsoever. Easy money.
Bobster, while I despise PK's arrogance, he makes a valid point. No serious poperty investor would buy the average house returning an average yield and paying the market price. I would never buy a house if I cannot get an immediate 20% improvement in capital value and I do not expect the property market to "lift" in order to make a profit (the increase of value over time is simply a bonus). I look at 100 properties and if I can't find one that provides upside... I keep looking
“The Man” is the man!
Grandiose name not sure of that, but extremely accurate.
And yes, landlords in general are doing a great thing for NZ in providing good shelter for those that don’t wish to buy!
Being s professional landlord is not always beer and skittles but it certainly is far better than having an 8 to 5 job and a way to financial stability.
BW
Exactly if running houses were as easy as these spruikers pretend I would still be doing it
There came a time I had all these houses & no time left for me
Sold the lot & got my life back
Property managers require watching also so there is no easy answer as a landlord plus it can be tedious
In the end you become sick of house repairs & tenants
I’m speaking of being a long term landlord not a speculator type
Question: How does westpac know that migration will fall to 10,000 three years ahead of time - are they the ones who issue the visas or employ migrants? ... Unless they know that this Gov will close the gates and shoot themselves in the foot with a RPG !!
I find it very hard to believe that anyone ( including Govs ) can predict matters for one year ahead related to the movement of people in this fluid and unstable world we live in today.
Our migration is diversified, and the ratios of Chinese, Indians, Filipinos, Poms, Aussies . SA, Americans, and expats change all the time..! So what on earth would make all this mix turn their back to NZ in such a short period of time ??
Logic suggests that this report is full of holes and lets out a lot of hot air ..
they could have one thing right, the pressure will be on Auckland ...obviously where most of the employment opportunities are and employers are crying for skills and workers. We didn't need Westpac or anyone to tell us that !
I think the "Indian Students, nudge, nudge, wink wink" will still try and come to round out their education, especially those from Dehli...
https://www.google.co.nz/search?q=pictures+smog+delhi+cricket&rls=com.m…:
Very true, no one can really predict what will happen next year let alone 3 years later due to the many possible interconnected factors happening all around the world. For all I know they both these specialist and govt makes predictions by coin toss or looking into animal guts for signs. Best sack them all and just let whatever happens happen.
The article refers to NET migration. So the projection will be assuming lots of people continuing to LEAVE New Zealand but with the overall net positive annual figure to be 10k. There is no issue with the 13k partner visas at all. Way way more people leave NZ every year than this.
True, I noticed that after making my contribution. I tend to follow permanent resident visas (>45k) rather than the less reliable tracking what people put on their arrival & departure cards. To get to 10,000 net from 70,000 we require Australia to improve its economy and New Zealand to continue or accelerate its decline. I'm not too optimistic of the former and rather depressed by the later. Thanks for correcting me.
I find this prediction quiet extreme tbh and am asking myself what on earth informed this massive change in prediction from Westpac?
It's looking possible to me that both Australia and NZ economies could be entering the doldrums over the next few years, so in my mind, for these figures to be even remotely possible, immigration from Asia would have to go down massively, which I guess could happen in an NZ recession and maybe young Kiwi's would be heading to Europe/US (if their economies are actually recovering) in higher numbers? If NZ and OZ slow at the same time, Oz still might work out better for many so NZ could still lose out there.
Still, massive swing in a short period of time is an extreme prediction. Bit baffled by it tbh
I think it is more predicated on the anticipated drop in overseas student numbers (particularly relating to the PTE sector) - in addition to the proposed changes to the immigration points system which will no longer apply additional points to those obtaining a NZ qualification with respect to residency applications (i.e., no longer is study a path to residency).
Additionally, as I understand it, this government were also reversing out the changes National made to allow those studying to also work up to 30 hours a week while on a student visa (i.e., no longer is studying a path to casual employment).
So, regardless the clampdown on PTEs providing low-end or poor quality course offerings, there is no longer that incentive for students also seeking to work/earn while here to attend those NZ educational institutes that remain open.
I'm guessing also that many working visas were for business owners and/or workers in that PTE sector, and/or businesses that directly targeted services at that sector - and those numbers of working visa are also anticipated to decline.
So if the student visa numbers alone decline by say 30,000 - there could well be another 10,000 working visas that previously serviced that student sector, which would go with them.
Additionally, the RE sector looks to be in decline - likely a lot of working visas associated with that sector as well.
I got an example of how house values been going up.
A newly arrived landlord, take a 2bedroom attached unit/cross lease.
Board up the garage, it becomes a bedroom. At the back of the was garage raise the floor 18 inches, install a bath room (run the waste pipe on the outside eall, with the 18in drop to the existing waste pipe)
Crop the lawn area in half by paving and erect a car port (4 legged, unbraced that leads to & frou).
Call it a 3 bedroom, able to house up to six students!.
The Council know nothing, nothing!.
Add refinance with the bank. etc.
Someone, somewhere has to provide a valuation to the bank. The bank isn't dumb. They'll look at 'what it was' last time it transacted and will want an update if the configuration has changed before extending finance.Ah! I see..........that's what the upcoming Court case is about!
Its a leafy suburb where it is, and the neighbours are spewing because, its a unit, down a shared drive way. So from a probable one, possible two cars. They are looking at and hearing 5 cars, maybe 6. With less drive/car space than before because the garage has gone bedroom.
Q: what could neighbours do, what could they do. Or does bad landlord drive out neat owner occupiers?
P.S. 1. building alterations done by landlord country of origin workmen. (No registered builder on site).
P.S. 2 Because the next door owner occupiers now have renters telling them, as renters, renters have rights too!
This'd be good for a handful of students too
https://www.trademe.co.nz/property/commercial-property/car-parks/auctio…
Dear Henry
Most garages in Auckland lost their cars years ago & became accommodation or rec rooms
The Skyline garage has also been a traditional form of accommodation for many across Auckland for decades now.
The good old days when it wasn’t so much this way were the 1960s when mums didn’t have paid employment.
When I was a broke apprentice new to Auckland I lived in a skyline garage early 80's.
It was colder inside than outside during a frost and like an oven on a summer day.
You dressed accordingly. You adjusted your lifestyle to suit.You had cheap rent that created other opportunities as it gave you some cash flow.
I valued having the choice. I didn't get sick. If I needed I would do it again but I would insulate if it was long term or my own property.
I think the time is fast approaching when switched on Landlords will compete on price to retain good tenants. Those that cannot accommodate this, WOF or the possibility of negative equity - sell.
It's also a given house prices are going to fall considerably. The only argument is by how quickly and by how much! FHB, wait and see how this all plays out - cheaper houses coming.
RP, have you a history of making correct predictions, or are you just another getting on the doomsday bandwagon, predicting drops in the Uckland prices that many have been on about for so many years?
Reality is that investors are just that and if they are any good the6 will have made enough in recent years to cover any drops.
Thing is though that they won’t bro ffloading good property anytime sooon.
Chch is certainly the place to invest in going forward.
Heard on the grapevine, that Gordon is thinking seriously about moving down to look for investment opportunities in Chch and Icould assist him if he was serious!
Rp you are Gordon aren’t you?
Our rental prices are generally the same as last year except our commercial has gone up!
House prices are not dropping in Chch if you have a well maintained property.
No. Of sales are down but that is creating opportunities and Chch is getting more attractive by the week to the many that are making it their home.
Hi R-P,
For goodness sake, landlords have always competed on price to retain good tenants.
In fact, there is documented (archived) evidence of English landlords having competed on price as far back as the 17th century to attract tenants "of good word".
R-P - time you were dragged kicking and squealing into the middle ages. You are literally centuries behind the rest of us.
TTP
TTP, yes sure! Google is rich with information where Landlords might have had to discount rents to keep good tenants, like 1930s for starters. Or London today here:
http://www.independent.co.uk/news/business/news/london-rents-fall-fourt…
You missed the bit where there is also archived evidence that house prices do fall. You might want to check this out - learn something about history yourself:
http://www.afr.com/personal-finance/the-great-australian-property-crash…
Try to respond in a more mature fashion. Despite invaluable feedback from commentators, including myself, your comments still lack any useful insight.
Good luck
Quote from Tony Alexander's (BNZ chief economist) latest weekly newsletter:
'This time I personally don’t think any of us really has a clue what the net gain will be in three year’s time. On the downside one might cite the improving labour market in Australia, foreign students in NZ completing studies, and government plans to slash gross migrant inflows by up to 30,000.
But on the upside the NZ labour market remains very short of people, and the government has notably not repeated its commitment to slashing migrant inflows – perhaps in the face of feedback that some industries would be very severely impacted. Net migration inflows will likely continue for quite a few more years and remain supportive of growth in the economy, housing markets etc.'
So basically, take your pick. Forecasting is notoriously unreliable.
Immigration rates shouldnt be a fixed value but based on growing net wealth of NZ.
We should give the net migration rate to the RBNZ to use a macroeconomic tool along with interest rates to provide price stability (and full employment objective).
Their aim would also be to maximise gdp per capita growth.
The government could set the maximum and minimum net migration rates for the RBNZ to work within (say 0% and 2%).
This approach would probably require house prices to be added back into inflation rate calculations.
The key issue is then for the government to set the details of the immigration policy so that the net migrants provide skills in areas most needed.
In a way immigrants, provide a subsidised pool of labour for businesses as they dont have to train them. It would also be worth considering applying a market driven price paid to the government that the businesses have to pay to bring in immigrant labour. The business would not have the right to recoup the cost directly from the immigrant except via bonding to work for a fixed period. The price would typically settle near the cost of training up local labour putting both labour sources on a more equal footing.
Page B12 Herald today quotes Grant Spencer "..an increase in international labour mobility has also affected wage inflation in NZ" which is a nice way of saying we are importing 3rd world wages. No problem if you have the income of the Reserve Bank governor but is sad for Kiwi battlers.
I dont believe Westpac's forecasts even though I bank with them. Yes its seems property investing is still going to be the way to build wealth in the future. I get a 12% rent yield on my properties (using historical purchase price as base=loans that I have).Thats before even looking at equity increases. I bought in 2005/6. So prices have doubled(minimum) over the last 10 yr period and I believe in 2020 the market will take off again. Get in while prices are flat.
Probably need to look to Auckland and think about the large numbers of low skill immigrants that have entered the country since 2012. This is an excerpt from Treasury's briefing to incoming ministers on infrastructure (as reported in Redell's blog):
"Auckland’s ability to absorb growth has been reached. Environmental, housing and transport indicators all reflect a city under increasing pressure. Traditionally, Auckland has been more productive than other regions of New Zealand but, on a per capita basis, this productivity premium has been shrinking over time. Auckland is not performing as well as expected for its size and in comparison to other primary cities around the world. There are opportunities to increase this productivity but only if supply constraints, especially transport and housing, are resolved."
https://croakingcassandra.com/2017/12/11/two-bims-and-a-bureaucrat/
I lived in an un-lined garage for 3 years. It was great. It was colder in the cold and hotter in the heat but the air inside was always wonderfully fresh, due to the permanent ventilation, and I didn't get sick. The savings allowed me to get a good start financially. Now I live in a house but even with a ventilation system the air inside isn't thae same. I believe the reason many not-rich people get sick is they don't adequately ventilate their rentals. A significant part of the problem is education - not so much any need for insulation. Some insulation products, I suspect, like many other building materials, may give off VOCs and poison the occupants.
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