Auckland's economy booming - strong immigration, employment and more tourists

Photo / Doug Sherring

City has strong net migration and rising employment and retail sales, plus a rocketing housing sector.

Auckland's economy is expanding quickly with strong immigration, employment, wage growth and tourist arrivals.

Chris Parker, Auckland Council's chief economist, has released his latest economic quarterly summary which showed the city's fortunes improving vastly as measured by a variety of indicators.

Parker found Auckland had an annual net migration inflow of 23,006 people in the year to December, made up of 45,120 arrivals and 22,120 departures. That was up on the 19,959 net Auckland migration in the August year.

"Auckland's population is growing strongly. This will increase spending in the regional economy and add demand for resources like housing which will lift house prices and rents," Parker said.

That strong migration had boosted the city's retail sales, up 9.8 per cent in the December quarter on the same period in 2013, although Parker said slow wage increases and caution taking on new debt had constrained Aucklanders' spending patterns.

Auckland had 749,000 people employed in last year's second quarter but that jumped to 782,000 in last year's final quarter. In the same period, Auckland unemployment fell from 6.2 per cent to 5.7 per cent.

"Strong hiring growth is the best indication of Auckland's economic performance. Employment increased 3 per cent in the past year and is up 14 per cent from the pre-recession highs. The unemployment rate has fallen from a peak of 8.7 per cent in the worst of the recession to 5.7 per cent at the end of 2014," Parker found.

Auckland real GDP (expenditure) grew from 2.4 per cent in the 2014 second quarter to 3.1 per cent in the third quarter but real Auckland wages were also up from an average $1096 a week in the second quarter to $1164 a week in the final quarter.

Parker said wage rises were modest but were still ahead of living-cost increases.

"There is further relief in store from recent falls in petrol prices. Wages are being contained by strong inward migration which is boosting the supply of workers," he noted.

Tourism's strength was illustrated by Auckland guest nights rising from 6,842,000 in the July year to 6,992,000 in the December year.

"The Auckland economy is growing strongly. There is more spending, employment and investment in the economy. There is added momentum from strong international net migration," Parker said.

A housing correction posed the greatest risk to the city's financial health. "Property is expensive and concern is high," Parker said.

Last August's $614,050 median Auckland house price shot to $660,000 by January, compared with New Zealand's median $426,000, he noted.

Auckland rents were up from August's $462 a week to $475 a week in January and Parker called for more intensification of areas close to the city centre where the land was most expensive and warned that Aucklanders needed to understand the nationally significant risks involved in not allowing that.

"Two of the most significant features of the Auckland housing market are the high cost of land, which drives house prices higher, and the comparatively affordable rents," he said.

"The disconnect between land price and rents cannot last. The housing market is signalling the need to use existing land differently, to allow intensification. If land use regulations prevent this, then land will become less valuable and the risk of amajor price correction becomes more real.

"Intensification allows land owners to enjoy a greater yield by having more dwellings on a site. Allowing land to generate more cashflow closes the disconnect between land prices and rents," he said.

"More dwellings per site in the central area will ease the housing supply and house price issues because more dwellings share the cost of land."

See the latest report here: