Migration not biggest price driver: Economist

The latest data from Statistics NZ shows that monthly net immigration accelerated to more than 4000 in March, a pace that has not been seen since 2003.

Annual net migration is set to surpass 40,000 by the end of the year, as fewer New Zealanders leave the country and more people come back from Australia.

Treasury predictions that immigration could reach 41,500 by the end of the year sparked concern last week that house prices and interest rates would soar as a result.

But Westpac senior economist Felix Delbruck said that was not necessarily the case.

“It's also worth noting that the lift in migration over the past six months has coincided with falling house sales and (as best we can tell) slowing house prices. That suggests that other factors - the RBNZ's mortgage lending restrictions and rising mortgage rates - have been more important in driving the housing market. We think the surge in migration will support the housing market through this year, but not enough to stop prices from slowing as mortgage rates continue to rise."

He said the migration boom would not last forever. As the Australian economy strengthen and the New Zealand economy started to slow, there could be a sharp reversal in migration trends.