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Migration will have little impact on house prices - professor

Thursday 22 May 2014 9:40 a.m.

By Andrew McMartin

Restricting migration could help lower house prices, but doing so would be extremely difficult and have little impact, a population economics professor says.

New figures show migration inflow is at its highest level in more than a decade, with a net gain of more than 34,000 migrants in the year to April.

Meanwhile, the number of foreigners moving to New Zealand is at an 11-year high, with 71,000 arriving in the past year.

The number of New Zealanders moving to Australia has also dropped, with just 23,000 crossing the ditch in the past year, compared to 34,000 in the previous year.

Treasury says the number could blow out to 41,500, while ANZ economists go higher, predicting 45,000.

University of Waikato professor of population economics Jacques Poot says the predictions will only have small impact on house prices.

"There is an expectation… that a 1 percent increase in population, due to migration, may well increase prices by about 1 percent, but some people will argue that is an underestimate." 

The overall rise in price would also depend on the flexibility of the market, says Prof Poot.

"It really all depends on the response of the housing market – how elastic or flexible is the supply to respond to the increase in demand?"

While restricting migration would have some impact on price, doing so would be extremely difficult, says Prof Poot.

"There is some virtue in it, in that it takes off some of the pressure.

"Migration does in the short run create what we would call excess demand, and therefore it does have inflationary impacts.

"To control that in New Zealand, which has one of the highest rates of both inward migration and outward migration in the developed world, is actually very difficult to do."

Labour has proposed limiting immigration to keep house prices down, but hasn't yet set a target. The Government has no plans to change the rules, saying New Zealand needs more skilled workers in areas such as information technology.

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