House prices rise as more Kiwis stay put

Relevant offers

Money

ACC levies may climb again Consumer confidence up, but caution urged Gold bullion dealer's victims want information Student debt myths debunked Damages claims key to Hibernian funds recovery Loan sharks cruising poorest areas - report Auckland, Wellington expensive for expats SFO launches investigation into gold trader World Cup prompts shoppers to open wallets House sales rise, median price stable

A strong jump in net migration caused by fewer Kiwis heading away is having an unsavoury effect on house prices, the Wellington Regional Chamber of Commerce says.

Statistics New Zealand figures for October show a continuing slowdown in people leaving the country permanently, while arrivals continue to be strong.

An 18 per cent drop in departures over the year to October has been the main driver in quadrupling net annual migration from 4300 in the year to October 2008, to 18,600 this year. Arrivals have eased 1 per cent.

It was the highest annual net migration figure since August 2004.

Deutsche Bank economist Darren Gibbs said that the net inflow would continue for the next few years, underpinning a housing recovery, and an economic boost spilling over into the rest of the economy.

Chamber chief executive Charles Finny said the increasing pressure on housing would boost prices, which in turn would force the Reserve Bank's hand to put up interest rates.

"The population is growing faster than the housing stock, which is putting upward pressure on prices. We welcome the population growth but the last thing businesses need now is a rise in interest rates," he said.

Departures fell 35 per cent in October, notably to Australia, a popular destination in recent years as the standards of living and relative wealth and income levels attracted Kiwis looking to improve their lot.

But Mr Finny said the slump in those heading across the Tasman would be influenced by lower interest rates in New Zealand, and that was a good thing. "It is in New Zealand's interests to sustain this competitive advantage," he said.

ASB economist Jane Turner said the main threat that would worry Reserve Bank Governor Alan Bollard was that the economy would return to be overly leveraged to housing debt.

In the next six months, Dr Bollard would be on watch for the strength in housing to return, and possibly prompt an interest rate rise earlier than Dr Bollard's stated prediction of late 2010.

"We expect the first official cash rate increase in April 2010."

- © Fairfax NZ News