Propertyscouts New Plymouth

Property Market Update - 20th Oct 2017

BY TONY ALEXANDER.

A report was recently released purporting to show that the key driver of migration to New Zealand is climate change. While climate change is important and undoubtedly probably does occupy the minds of some people when it comes to choosing where to spend the rest of their lives, at this stage the physical manifestation of changing climate does not seem great
enough to necessarily supplant other factors more traditionally seen as driving relocation decisions. In ten years, who knows?


Key among these factors is the values which are embraced and displayed by a country and employment prospects. In that regard we still see no reason for expecting that the small turnaround we may be seeing in net migration flows is going to turn into a rout.


By that we mean that in August this year there was a net migration gain of 5,120 people whereas a year ago the gain was 5,450. This is the largest month on same month of a year ago decline since mid-2012 and while hardly all that big does make us (once again) prepared to say that annual net migration gains have probably peaked. We say “yet again” because for the past two years we have all been surprised by the continuing strength and rise in net migration flows. A key driver appears to be, as mentioned, the strong state of our labour market. NZ job numbers have risen by 3.1% in the past year or 76,000. Recent surveys show businesses still plan hiring more people even though they are struggling to find what they want. Recent media reports even suggest that sourcing the likes of construction workers from offshore is proving very difficult.


A net 19% of respondents in the NZIER’s Quarterly Survey of Business Opinion, which has been running since the 1960s, say that they intend hiring more people in the next three months. This is down from 27% a year ago but up from 12% in the June quarter and above the ten year average of 10%. But a net 46% of businesses say they are struggling to get skilled staff versus a ten year average of 19%. Moreover, a net 27% say unskilled staff are hard to find whereas on average 4% have said they have found it easy to get unskilled people.


The strong state of our labour market is perhaps not so greatly important when we are thinking about flows of Kiwis returning from the UK and US or people migrating here from there. Instead it matters a lot for trans-Tasman flows. Research shows that the relative state of the NZ and Australian labour markets is a key driver of flows across the Tasman.


Recently data on Australia’s jobs growth have been strong. That perhaps helps explain why the annual net flow between our two countries has dropped from a peak of 1,958 in our favour in September 2016 to 226 in the year to September this year. A turnaround is occurring but it is very small and the chances that we will soon be back anywhere near the net loss of 40,000 seen in the middle of 2012 are very slim.


This is important for the NZ housing market. Data show the pace of price increases is slowing around the country as post-Auckland booms in the regions fade. But the chances of a housing rout remain as slim as ever even though we have concerns about over-building based on over-optimism regarding flows out of Auckland in some regions.


NZ population growth looks like remaining reasonably firm going forward, though not as much as over the past two or three years. That is because the cycle with Australia has turned, because labour markets have improved overseas, and because the outcome of coalition negotiations (still unknown at the time of writing this mid-Thursday 12) is highly likely to involve a tightening of immigration rules.


That means continuing fundamental long-term support for housing markets in our main cities and long-term upward pressure on prices.

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