Immigration peak to fuel house prices

Photo / Michael Craig

The net flow of people coming to live in New Zealand will peak next month at nearly five times the long-term average - adding more fuel to the Auckland housing market.

Migration levels are not expected to return to normal until 2017.

Net migration inflows have recently been driven by fewer New Zealanders leaving for greener pastures overseas, but that has changed.

Increased arrivals are now the larger factor and accounted for about two-thirds of the increase in the past year.

Annual net inflows - the total number of immigrants less the annual number of emigrants, including both citizens and non-citizens - are now expected to peak at around 57,000 in the year to June, before returning to the long-run average net inflow of 12,000 by 2017.

High levels of immigration will help push up house prices, the Treasury notes in its Budget Economic and Fiscal Update, which says: "Housing demand is being supported by lower fixed-term mortgage rates as long-term interest rates fall and by continued migration inflows.

"The housing supply response in the Auckland market remains gradual. Consequently, national house price inflation is expected to increase in 2015, supported by rapid house price inflation in Auckland."

The Government has set aside $52.2 million for its new plan to partner with private developers and build thousands of lower-cost homes on swathes of Crown-owned Auckland land.

Housing and Building Minister Nick Smith said a capital contingency fund had been established for the policy. The money would be used to purchase land parcels from relevant agencies such as Housing New Zealand and Departments of Defence, Education and Transport then make them available to private developers.

Dr Smith said a proportion of the homes would have to be "affordable", with a likely price cap of $550,000 to match the eligibility rules of the KiwiSaver HomeStart scheme.

The actual number of affordable homes was yet to be nailed down and it was too early to predict when the first of the new properties would be built.

He estimated between 4500 and 10,000 houses could be built on the new land parcels, depending on the size of the sections and the intensity of developments.

He hoped to have the first development agreement signed within six months and that homes could be built within two to three years.

Labour's housing spokesman Phil Twyford told Parliament the Budget would do nothing to address Auckland's housing crisis.

"They won't build the vast number of affordable houses that are desperately needed ... instead we get these silly little special housing areas that are basically just lines on a map."