Key sees Auckland housing market slowing down; says migration not to blame for house prices in long run; defends migration policy

By Lynn Grieveson

Prime Minister John Key has defended the Government's current migration controls, downplaying suggestions the current surge in net migration was increasing either house prices or interest rates in the long run.

Key told reporters in Parliament Auckland's housing market was already slowing and calls from Labour Leader David Cunliffe for tougher limits on migration were populist and not achievable.

Key denied the current rise in migration was responsible for higher interest rates.

"No, I don't think it is," Key said.

"I was talking to one of the major real estate agents, funnily enough, on the weekend. I just happened to run into him at something and he was telling me house sales are down in Auckland. They are expecting to sell significantly less homes this year than they did for instance last year," Key said.

"Migration always has some impact on housing although over the long-term it can actually help with the housing issues as well because many people who come in play a part in the rebuild," he said.

"They brings skills and other traits with them. But I think overall it is really important to understand that we do manage migration. We have for a very long period of time. What's changed here isn't an influx of migrants. It's that New Zealanders aren't leaving, and in reality these things go through cycles. And many of the people that come, well, would you really want to turn them away?"

Key asked if Cunliffe would be going to South Auckland to tell the Pacific community they were no longer welcome.

"Will he be going to Australia to tell the Australians that come to New Zealand in quite large numbers by the way you are not welcome here even though we have an agreement with you? And all of the others really fit into a high skilled category for the most part. They are people that have studied at our universities and they ultimately stay longer in New Zealand," he said.

"In my view is it would be a very knee jerk reaction to go out there and all of sudden say we are going to completely stop migration."

Key said such controls were not practical and the simple answer was to build more homes.

He pointed to net migration of 43,000 in 2002/03 under a Labour Government.

"For the most part, he knows like I know that you actually can't turn off that tap of people who have free rights to come here, like Australians, very easily," he said, adding that skilled migrants were also needed.

"We are a young country. We are 4 and a half million people. Our population is slowly rising. It's not the government that said: 'every person who wants to turn up to New Zealand can come'. We are very tight actually on our criteria and it's actually quite difficult to get into New Zealand. There will always be cycles and this is a cycle where we are more attractive than other destinations."

Key was then asked why the Government did not agree to take less than the current intake of 71,000.

'Careful in 2009/10'

He said many were skilled migrants or part of family re-unifications.

"When the labour markets for instance were quite difficult in 2009/2010 we were very careful about migration. Even now, if you go and ask the average member of parliament 'what is the number one thing they do for their constituents, it's actually advocating for migration, because it is actually very difficult to get into New Zealand," Key said.

Key said the Productivity Commission had identified six or seven things that drove house prices.

"The most significant is actually land price escalation and the slowness of councils and others to actually release new sections and land. Migration plays one part, but it is worth remembering, if you think about Auckland, a lot of the migration that takes place in Auckland is domestic migration. It's the person whose job was currently in Dunedin and has moved to Auckland and it happens quite a bit," he said.

"To be blunt, David Cunliffe is looking at his polls and he is desperate to smack anything that goes vaguely past him. That might be a populist thing to argue about, but most New Zealanders will take a step back and say 'this is a country built on migration, our population is four and a half million, migrants have added a lot to New Zealand'.

"There was a time not so long ago that the Labour party was seen as the party of migrants. I guarantee you when he goes to those meetings with the Chinese Community and the Pacific community he will have a completely different message from the one he's wanting other people to believe."

'Pressure on interest rates?'

Key said the Reserve Bank's high LVR speed limit had largely been working and interest rates were now rising from 50 year lows because of stronger economic growth.

Labour leader David Cunliffe, speaking to reporters after Labour's caucus meeting, said migration needed to be at "moderate, sustainable levels" and it would be possible to "gradually and smoothly adjust the flow" of migrants into the country.

He refused to give a figure that migration could be capped at.

"Labour would increase housing supply, apply a capital gains tax to domestic investors and make it harder for offshore speculators to drive our property market," Cunliffe said.

He said migration made "a contribution to rising house prices" and it was important to have policies to address that, such as Labour's proposed Kiwibuild programme to increase housing supply and a ban on offshore property speculators. Any ban on offshore property speculators would not apply to New Zealanders living overseas, Cunliffe said.

"New Zealand citizens are always entitled to buy property in New Zealand," he said.

New Zealand First Deputy Leader Tracey Martin later said half of migrants were not in the skilled category.

“With over 40,000 permanent resident visas now being issued each year the National Government is not doing New Zealand any favours by flooding the country with people, many who may never work here or who will compete with Kiwis for jobs and services,” Martin said.

“The National Government has consistently justified the very high levels of immigration on the basis of skill shortages. As we pointed out in Parliament today, the number of people being given residency and not categorised as skilled workers is almost 50 per cent of the total. Why are we so lax?  Why are we such mugs?," she said.

(Updated with comment from NZ First and David Cunliffe)