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Are NZ house prices far too expensive?
A big turnaround in the trans-Tasman brain drain is poised to put new pressure on house prices and has the Government scrambling to build new classrooms.
Experts are predicting that, by the end of the year, the number of Kiwis heading across the ditch will be outpaced by the number returning - which has not happened since 1993.
Bank of New Zealand economist Tony Alexander said yesterday he expected the crossover point to come this year. The main driver was fewer Kiwis leaving for Australia "because the allure of Australia has diminished quite a bit".
"A lot of chooks have come home to roost in their federal budget management, in their manufacturing sector and also their resource sector, coming off an exceptionally high level so... a big reality check."
Alexander said the migration surge would likely add pressure to house prices - making it less likely the Reserve Bank would ease restrictions on the size of deposit required for mortgage lending.
Auckland house prices rose on average by 38 per cent between January 2009 and July last year and that was during a period of "slightly below average" net migration gains.
"If they've got this extra boost to the housing market coming along from accelerating population growth, it's pretty unlikely they will be making any great change in those rules later this year."
The predictions of a reverse brain-drain compare with two years ago, when the exodus across the Tasman reached record levels and there were fears it would only accelerate.
The speed of the turnaround appears to have taken officials by surprise - last week's budget predicts a net migration boost of about 40,000 as a result, a rise of 12,000 on December forecasts.
Finance Minister Bill English admitted it posed a "challenge for the economy" and said the Government was already looking at building new classrooms.
But he rejected Opposition calls for a cap on the number of new immigrants from elsewhere.
Labour Party leader David Cunliffe said a new OECD report yesterday found New Zealand houses were the most overvalued in the world, based on rental income, and among the most overvalued based on incomes.
"You can't throw another 40,000 people at a housing market that's already overstretched and expect there not to be a worst crisis.
"The Budget documents indicate 49 per cent of the average wage is required to purchase an average house on an 80 per cent mortgage and in five years' time that's going to be 63.5 per cent .
"I would say this problem is going to get worse not better and home ownership rates will decline."
Cunliffe said the Government needed to deal with the looming immigration crisis by ensuring there was a "steady positive" flow of skilled migrants at a level which met skills shortages.
"And if there is a whole lot of New Zealanders returning they get first dibs and they fill specialised skill shortages."
But Housing Minister Nick Smith said the immigration story was "incredibly positive".
"There's no change in the number of new immigrants approved to come to New Zealand - the big change is that fewer New Zealanders are leaving, mainly to Australia, and more are coming home.
"It's been a phenomenal turnaround."
He was not surprised by the latest OECD report, meanwhile, because many of the countries New Zealand compared with had been "on the ropes" economically over the past year or two. "So with our economy doing better . . . it's not surprising that New Zealand is sitting at the top of the table."
That was why the Government had made several reforms in the housing market, particularly around land supply. The first new homes built under those reforms would come on tap later this year.
- The Dominion Post
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