Latest immigration numbers good for housing market

Economists have been concerned that weaker than forecast immigration in recent months, and an outflow of people to Australia may have further hurt the housing market.

However, net permanent and long-term migration rebounded in July, with the strongest seasonally adjusted net inflow since March this year.

“We had been perplexed by the weakness in permanent and long-term arrivals of foreigners over recent months, because foreign arrivals are administratively controlled,” Westpac says.

“This month, foreign arrivals were much stronger than expected, reversing some (but not all) of the recent weakness.”

The weak run of net migration data over recent months had us worried that house prices and the residential construction sector might undershoot our forecasts. Those concerns have been partially assuaged by the rebound in foreign arrivals.

“This data may be seen as removing some of the downside risk to the housing story.”

The other trend-bucking development in July was a sharp decline in the seasonally adjusted number of Kiwis migrating overseas. Departures to Australia were 27% higher than July 2009, but 28% lower than in July 2008.

“At this stage we view July departures to Australia as a weak outlier in an otherwise rising trend. We expect the strong Australian labour market will continue to draw increasing numbers of Kiwis across the Tasman in coming months, and that is likely to keep overall net migration at a low level.”

ASB says that although these numbers are positive the “drivers of recent trends remain in place and we expect that net migration will remain relatively subdued over the next year.”

“Job growth in Australia continues to outperform job growth in New Zealand, and will continue to attract New Zealanders across the Tasman. Meanwhile, the relative weakness in the New Zealand market reduces the need to recruit from offshore, and the number of new arrivals is likely to remain subdued.”