No relief in demand pressures

Annual net migration hit a new high of 70,588 in the year to end of December 2016, according to the latest Statistics New Zealand data.

This was a noticeable increase on November’s record of 70,400 and reflects the trend of a growing number of people arriving while fewer people are leaving.

The seasonally adjusted monthly net gain of migrants dropped slightly to 6,010 in December, from 6,190 in November.

However, the monthly net gain remains strong with December the fourth consecutive month where the monthly gain has been above 6,000.

Record migration is a significant contributor to New Zealand’s, and particularly Auckland’s, strong population growth.

This factor is feeding into Auckland’s major housing supply shortage and upping pressure on the demand side.

Six months ago, commentators thought the migration flow had passed its peak and that slowing migration might start to ease the pressure on Auckland’s housing market.

But today’s data stands in sharp contrast to that view.

ASB economist Daniel Snowden said the data showed there is no sign yet of a slowdown in those wanting to come to New Zealand.

Departures did move a touch higher from November, but did not break any records, he said.

“Looking further out, we expect annual departures to slowly increase, as some of the students who arrived over the last few years conclude their studies and return home.”

However, the composition of arrivals is changing, with those on work visas making up for a drop in the number of students arriving in the last few months, Snowden said.

“Declining student numbers could keep some downward pressure on departures numbers in subsequent years, as less students coming in means less students eventually leaving. 

“In addition, those on work visas are less likely than students to return home over the next few years.

“That could add to downward pressure on the departures number, limiting the pace at which net migration could slow.”

Westpac senior economist Satish Ranchhod agreed that the arrivals is mainly due to more people coming on work or residency visa, which has offset a decline in the number of international students.

He said the record levels of net migration continue to reflect two key trends.

One is strong levels of new arrivals from Asia and Europe, particularly China and the UK. The other is the steady rise in the number of New Zealanders returning from overseas.

“These trends are expected to continue to some time, with New Zealand’s positive economic story, including its labour market, making it a very attractive destination.

“We expect net migration inflows to remain strong for some time.”