Migrant gain to steady house prices

Net migration may top 20,000 this year, helping to steady the struggling housing market and weak retail sales, according to economists.

Statistics New Zealand figures show a net gain of 2690 migrants in May, seasonally adjusted, the highest figure in almost six years.

But even a potential net gain of 20,000 migrants a year would not spark a repeat of the house price boom which was led by a rapid rise in migration from late 2001, economists said.

Instead, rising unemployment will keep a lid on house prices and shop sales, especially for big-ticket items. House prices have fallen about 11 per cent from the peak, and the Reserve Bank expects another 2 per cent fall, but stronger migration is expected to prevent bigger falls.

The net gain from migration was 11,200 over the last 12 months, according to Statistics NZ figures issued yesterday, the highest annual inflow since 2007.

Just six months ago, the annual gain was about 5000.

More migrants and more affordable housing because of falling mortgage rates in the past year and lower house prices should help overall demand for housing, economists said.

Infometrics economist Matt Nolan said the migration figures would be "a bit of a boon for housing and retail sales" compared with expectations a few months ago.

House prices would stop falling because of the rise in migration, and prices may rise slightly by the end of the year, he said, but it would not mean a large rise in house prices.

"We will see stabilisation" of prices, he said. "We think we have probably hit the absolute trough."

But the migration gain reflected fewer people leaving the country, not more people arriving. If people were nervous about leaving New Zealand they would not start spending a lot more in New Zealand either, he said.

Infometrics did not expect migration to hit the peak seen five years ago when the net gain topped 42,000 a year, but Mr Nolan expected a net annual gain of more than 20,000.

Supermarkets would do well from rising net migration, but sales of durable goods like furniture and floorings would not rise till there was a lift in house sales.

A strong rise in net migration in the past six months reflects far fewer people leaving for Australia and other countries for long-term trips, because of the global economic downturn. More Kiwis are also coming back to New Zealand.

"New Zealanders are playing it safe and opting to stay put," said ASB Bank economist Jane Turner, rather than risk a more challenging job market in Australia.

The timing of the lift in migration was good because both housing and retail sales were at "cyclical lows" in the recession.

"But we don't see big gains for house prices given we are going to see rising unemployment. But migration is one offset and will probably prevent prices falling too far, and help them stabilise later this year," Ms Turner said. House prices may start to pick up slightly, but any rise was likely to be outpaced by inflation, she said.

Excluding returning Kiwis, the arrival of foreigners was down 6 per cent in May, compared with the same month last year. Ms Turner said if the net monthly trend continued migration was well on track to reach almost 20,000 a year "if not stronger".

- © Fairfax NZ News