New research finds the composition of migrants has no influence on house prices, but New Zealanders moving tends to push prices up more

New research finds the composition of migrants has no influence on house prices, but New Zealanders moving tends to push prices up more

New Zealanders moving within New Zealand have a bigger impact on house prices than the same numbers of migrants, according to new research.

Researchers at Motu Economic and Public Policy Research have crunched the numbers between 1986 and 2013. They found that increasing population does indeed have an impact on house prices, but they also found that moving New Zealanders actually put more pressure on house prices than the same number of migrants would. The research was funded by the Ministry for Business, Innovation and Employment. 

Motu research fellow Trinh Le, one of the authors of the research, said that between 1986 and 2013, the number of foreign-born New Zealand residents more than doubled, whereas the New Zealand-born population rose by only 8%. Over the same period, the average real (inflation adjusted) house price increased by about 140 percent%.

"What we didn’t know was the impact that different migrants were having on the housing market."

The research found that a 10% increase in local area population is associated with 4–6.5% higher house prices.

"Good years bring more net migration into New Zealand, and this leads to higher house prices. We designed our research to control for this and to try and discover how the size and mix of local population growth affects local housing markets," Le said.

The research categorised people by whether they are foreign-born or New Zealand-born, and whether they live in the same local area as in the previous census. In particular, it split the population into six groups: new immigrants, returning New Zealanders, immigrants who move within New Zealand, New Zealanders who move within New Zealand, staying immigrants, and staying New Zealanders. 

She said that after controlling for socio-demographic differences, the researchers found that moving New Zealanders put more pressure on house prices than the same number of immigrants would.

“We found no evidence that a higher share of new international immigrants is associated with higher house prices and there is little evidence of a relationship between who lives in a particular area and housing market prices."

The research found that in areas with a 1% higher share of returning New Zealanders (and 1% fewer staying New Zealanders), house prices are up to 9% higher on average. Similarly, a 1% redistribution of population from staying New Zealanders to moving New Zealanders is associated with up to 2% higher house prices. In contrast, having a relatively higher number of new or moving immigrants in an area has no effect on house prices, after controlling for the population size. 

The research found that New Zealanders tend to migrate to areas with more slowly growing housing supply. Areas that have 1% more moving New Zealanders (and 1% fewer staying New Zealanders) have, on average, about 0.4 percent less housing growth. "This suggests a possible reason why returning New Zealanders have more of an impact on house prices." 

The researchers also looked at the cost of rent.

“Housing provides shelter and is also an asset. House prices capture both aspects, while rent prices only capture the first,” Le said.

The researchers found that rents do not respond much to population growth, although they are positively related to higher shares of recent movers, whether these are from inside or outside New Zealand.

“We find that migrating people manage to find places to live, with a large effect on the number of occupied dwellings.  We are unable to identify whether this is a result of house building or higher occupancy rates." 

Le said overall, there is little evidence of increased crowding, with household size changing little over time.  However, immigrants tend to live in larger households, suggesting a possible explanation for why immigrants put less pressure on housing demand.

Due to data availability, this research only looks at figures to 2013. Since 2013, the population has grown at an historically high rate, with migration accounting for a large share of the change.

“Both population and house prices have increased substantially since 2013, but we have no reason to expect different results. Our study covers similar strong-growth periods, e.g. 2001-2006, when average real house price increased by over 50%,” said Le.

We welcome your help to improve our coverage of this issue. Any examples or experiences to relate? Any links to other news, data or research to shed more light on this? Any insight or views on what might happen next or what should happen next? Any errors to correct?

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24
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"Due to data availability, this research only looks at figures to 2013". Could have been put in the first paragraph to avoid me reading the whole article.

15
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Yes agreed, missing out on almost five years worth of census data seems bizarre, considering that the last census was conducted well over a year ago. It kind of feels like they don't want us to know the results of it due to it being too shocking.

Its like comparing the first iphone to the new iphone X and saying the iphone X is only 3% better. After a total boom in new technology and advancement.

the last census was a shambles though so what data can you take from it, and comon sense would be to run it again next year the old way to get the data needed but no they will wait another 5 years

10
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I'm starting to wonder if that effective destroying of that information stream was a deliberate tactic from the last government. Simply undermines the flow of poor statistics caused by policy's.

Yes agreed, missing out on almost five years worth of census data seems bizarre, considering that the last census was conducted well over a year ago. It kind of feels like they don't want us to know the results of it due to it being too shocking.

You're arguing at cross purposes. 'House prices' is the dependent variable and leaving out the data post-2013 doesn't pass the sniff test when we know they've gone ballistic.

But even having census dara does not go far enough for a cause-effecti analysis here.

Motu's research and conclusions appear do not appear robust in the slightest. I think trying to fit data and research to the narrative they want to tell. Or they don't have the chops, resources or time to do anything properly.

16
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Also interesting that they absolutely found that an increase in population by any method does have an impact on house prices:

The research found that a 10% increase in local area population is associated with 4–6.5% higher house prices.

"Good years bring more net migration into New Zealand, and this leads to higher house prices."

I've seen some (elsewhere) immediately leap to saying "See, migration doesn't cause house price rises", but their research says it does. Take into account that the last decade or so saw net migration at fully twice the OECD norm...and it's pretty clear that houses prices (along with other infrastructure and services issues) need to be part of the discussion about what rate of migration is appropriate for a country.

Celebrating it as a sign of our success (along with house price rises) or a "good year" is nonsensical if it's not combined with discussion of what net rate is viable given infrastructure and services needs. It's short-termism looking only at one side of the equation. Sure, migration is a good thing, but if more volume was always more goodness and viability is never an issue then Germany wouldn't have closed its borders since Merkel's enthusiastic throwing open of the same.

All that said, 4-6.5% increase in housing prices based on a 10% increase in local population is not too bad, really. Suggesting local enthusiasm, cheap money, and capital inflows have played far larger parts...and immigration alone won't hold house prices up if other factors don't.

Good to see someone who can see through what is extremely sketchy propaganda dressed up as research.

Gee my own North Shore home received 25% higher offer in 2015 than it did in 2013 & so it was an offer I simply couldn’t refuse and the buyer ? Chinese migrant
Chinese migrant bought my neighbours house in 2015 from a fellow Chinese migrant for nearly double the price he paid in 2010
My entire street demographic changed to Chinese migrants
An employee who was a Chinese migrant & owned a home in Long Bay borrowed 750K from China at just under 1% rate & purchased a larger second home & renting the other to another Chinese migrant
So anecdotal evidence exists that is factual and can be verified so it’s hard to understand why use statistics that only go up to 2013 when everyone knows there was a great leap in prices 2013 to 2015/16 unless your purpose is to appease your masters who paid for the “report”
I must add I’m grateful to Chinese migration to NZ for my own personal reasons financially but I despair at the complete lack of government policy & oversight that resulted in foreigners openly speculating in Auckland homes for tax free gains & the short sightedness of allowing young migrants to bring their aged relatives to reside in NZ using its free healthcare system at a time of life when elderly require larger healthcare inputs
I guess you will all figure it out
Good Luck NZ

The Banks made most money out of all this and sent most of it to Australia. And some of our politicians got into the revolving door benefits.

What a waste of time. Did someone pay for this research? The Banks? Government?

12
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i think cheap credit is more to blame than anything, if interest rates were higher and credit more restricted then we would not have seen such high growth

10
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Absolutely. Look at the correlation of credit creation by banks and house prices as they are very much inline. DFA in Australia did a statistical analysis and found that it was responsible for 60% of the increases there. I doubt it would be much different here.

11
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Yep. Another article about house prices that fails to mention the one thing that inflates house prices: money. Where does the money come from?
If an immigrant comes here with $5000 and works as a dairy manager, that's not going to have a huge effect on house prices. If overseas buyers with access to tens of millions of dollars can purchase through a NZ resident or citizen, that's definitely going to push up prices. If banks happily lend $800k to a couple that earns the median wage, that's also going to push up prices.

Now let us continue our search for this mysterious X-factor that inflated the bubble. No, don't look at banks or China, silly! Nothing to see there. Hmm, what should we investigate next? Maybe it's our great rugby? Or our amazing beaches?

I agree. However, I feel one can't deny the impact of rising rents since 2014 mainly due to higher migration and limited rental stock in favour of speculative buying decisions.

I came here to make exactly this type of comment. I guess some will never see what they really don't want to so making up alternative stories seems better.

High immigration growth, cheap and easily available credit only causes high house prices when land is restricted.

"The research found that a 10% increase in local area population is associated with 4–6.5% higher house prices"

and how much did auckland increase by between 2008 and now
At 30 June 2008, Auckland, with an estimated resident population of 1,414,800
2019 1,582,028
so by my calculation its 11.82%

And the Median house price over the same period went from $450,000 to $850,000. An 89% rise.

Great work David. As usual Interest is doing quality journalist (i.e. actually reading and understanding the study) and not coming up with a misleading headline (looking at you stuff!)

13
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It would have been helpful if there was a caveat in the headline that this analysis was for the period to 2013.

As such whilst interesting and thought provoking it's not considering the big issue ~ Chinese money coming to Auckland and beyond from 2012 to 2016.

Excellent point.

“Both population and house prices have increased substantially since 2013, but we have no reason to expect different results. Our study covers similar strong-growth periods, e.g. 2001-2006, when average real house price increased by over 50%,”

Isn't it exactly considering that factor?

It's essentially telling us where not to look. It's saying that non New Zealand citizen migration patterns are not responsible for substantial upwards pressure on house prices. That's not new - it's a result that has been reiterated over the years in NZ data.

I dunno how you control for exogenous Chinese capital - maybe some sort of FDI instrument? But, it's relatively evident that migration alone isn't a good enough control and anecdotally that makes sense (queue the FBB).

Plus, I don't see how adding in the most recent census data would alleviate your concerns (or anyones...). There would have to be an exceptionally large effect to increase the covariance of immigration shares and house prices in the model. You guys are also misunderstanding the structure of the immigration variables which is why you think the effect is attenuated. Those are essentially the reasons for the author's comments regarding the insignificant effect of increasing the panel to include 2018 data.

Of course all you armchair experts can suggest that the panel be shortened to amplify the effect. But then that would be super hypocritical, wouldn't it...

One thing that this thread has done is made an otherwise dreary, rainy night a be more enjoyable reading the comments. Interesting how obvious it is that not one of you really knows anything about the underlying econometrics of this article. Yet, you all have an opinion on how flawed it is.

The majority of folks on this site read the articles. However they are most interested in the current trends in the housing market. This article and the analysis isn't that relevant because the large ramp in Auckland house prices and the ripple out were nothing to do with immigration. As we all know the issue was caused by a tsunami of Chinese money flooding the top end of the property market and dragging everything higher. It's a shame the analysis didn't cover this topic as it would have been more relevant and useful.

As we all know the issue was caused by a tsunami of Chinese money flooding the top end of the property market and dragging everything higher.
How do you know that? Like I said, I don't think you know how you tease out that effect empirically.
Also in the absence of this report you, like the others, would be becrying inwards immigration as the key cause (as has been done countless times here)...So. No. I don't believe that this isn't relevant.

By the tone of you seem to assume every commentator here is a xenophobic racist hung up on immigration. Not me. I'm a new immigrant myself. Cool down bro.

Not at all.
I'm just pointing out that it's a bit rich to rubbish the report in favor of a gut instinct about the cause of house price growth.

Immaterial as is only till 2013 and the actual speculation and money laundering started after 2103. Besides most studies are biased and done to arrive at a pre determine conclusion (Not always but most of the time).

“Both population and house prices have increased substantially since 2013, but we have no reason to expect different results. Our study covers similar strong-growth periods, e.g. 2001-2006, when average real house price increased by over 50%,”

When you overlay Household Debt to GDP against house prices for the period between 2011-2017 it does appear that there is something different about the price appreciation in recent years.

Previous instances of rapid price appreciation in the last 20 years have been closely tied to increasingly Household debt to GDP ratio. It suggests that additional capital has been injected into the housing market as the price appreciation wasn't solely due to increasing debt levels.

I'd suggest the other factor at play is low rates allowing people with smaller mortgages to pay down debt faster, but its unlikely to explain the entire disparity between prices and debt.

Yes lower and cheaper credit are certainly an additional reason but that is not the topic of the above article

10
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Even the commentors on Stuff have worked out how crappy this study was.

The headline is literally contradicted numerous times in the copy.

May be they did consider this, but surely the crucial variable is income and wealth of the migrant?
Also, not broken down for Auckland, where influx of immigration has had most influence 2008-18, cf rest of NZ. The wide period from 1986-2013 and coverage of all of NZ disguises more than it reveals I am afraid. The price of high value property (above $1.2m for instance) in period 2012-17 in Auckland, by the measure of any honest estate agent, was pushed higher by about $100,000+ by the fact that foreigners, mostly Chinese in origin, were allowed to buy property here whilst in fact resident abroad. This is patently shown by the 40% drop in sales above $1.4m in Auckland from January 2019 to June 2019 inclusive, whilst lower bands on price were far less affected.

"Is associated with" re immigration and price increase. A bit dodgy that terminology I am afraid, to a worthy social scientific study as it should be. Association means one variable went up when other did. Effect fo other variables, we are told (demographic) was controlled for. Association though, does not mean causation.

""there is little evidence of a relationship between who lives in a particular area and housing market prices"". Surely debateable. My sister lived on a long road in Huddersfield UK when Kashmiri immigrants began to move in to the bottom (town) end. The price of houses soon depended on where on the road you lived especially when the insurance companies started black certain areas. My own PI familiy know of many Maori & PI families who deliberately live in the North Shore and very broadly a house in North Shore is more expensive to buy than a similar property in South Auckland. Where it will get quite interesting is when certain Auckland suburbs become predominately Asian (meaning single ethnicity Asian); in Britain it was found that there was a tipping point when over 50% of a school were a single ethnicity - very liberal families moved away for the sake of their children's education (or if wealthy sent them to private schools - Tony Blair's kids did not go to local Islington schools).

This seems immaterial compared to the impact of wealthy foreign buyers over the period and during the boom/bubble. If a wealthy foreign buyer buys a house from a local (previous migrant or NZ born) for more than the current market rate, which certainly happened a lot, that would have a big flow-through on prices - including what that seller buys next with the extra money. Oh, but we didn’t collect any data on that *Facepalm*.

14
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Was this research funded by The National party

... was this research funded by people whose names sounded Chinese ( the Twyford effect ! ) ...

Dgm, the" research "was funded by MBIE. We all contributed in our little way .

19
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NONSENSE .......... the article is utter bollocks

1) The stats used are half a decade ago
2) Lowest cost of money in my lifetime has not been considered
3) In-bound immigration peaked after 2013
4) The stupid legislation which hinders growth and to costs and constrains the building of houses has not been considered
5) QE which resulted in ultra cheap carry -trade "hot money : chasing yields has not been considered
6) The wage rates of trades , in short supply , and where costs have rocketed was not considered

... well said , Mr B : and the lions share of the increase in house prices has been the astonishing increase in land prices ...

KISS : Key Input , Soaring Sections ...

Well said Boatman

10
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So a NZ wage and tax payer randomly pay's $100s of thousands and doubles the price of everything in short order just for the hell of it. Calling BS on that - #fakenews

So a NZ wage and tax payer randomly pay's $100s of thousands and doubles the price of everything in short order just for the hell of it. Calling BS on that - #fakenews

You are applying Fat Tony (the Nassim Taleb characterr) smarts there. Your question trumps the Motu conclusions.

The study should have been conducted for the period under John Key for number of reason.

This report is amateur at best!

The easiest way to put this is has the influx of immigrants contributed to the housing shortage, short answer is overwhelmingly yes!

Bindi, Bank economists and just about all other commentators never pass up the chance to remind us how the housing shortage is driving up prices.

The bigger question however is what % of immigrants buy a house within the first 5 years, because that is the real demand pressure that directly effects prices as they are actively competing with existing kiwis in the property market which of course drives price increases.

I am going to be bold and say I wouldnt be surprised if it is less than 10%, as spouses & children, students, call centre staff, uber drivers, baristas, pedicure, door to door sales people and many other low wage migrants are unlikely to be in the market for a house.

There seem to be a lot of people out there who think that NZ has high immigration because it's attracting top talent from all around the world.
Yes, there are some highly skilled immigrants who come here to work in IT or fintech, but the majority seem to be dairy managers, fruit pickers, chefs, waiters and their families.
I'm an immigrant myself, been here for 4 and a half years, have a salary that's probably in the top 5% and still haven't bought a house. I have many immigrant friends and know only one couple who bought a house two years ago, after being here for 10 years. Funny thing is, they bought a shitty 3br cottage on Papamoa beach, sold it a year later for $500k, moved to Brisbane and bought a 5br brand new house there.

So you live in a cardboard box in middle it road, then?

That.. could be, THE most useless study on housing and population growth to date.

I stopped reading it at "1986 and 2013"

Well every immigrant I can communicate with has brought at least one house some have brought several. Its alarming how they view our housing stock as something to exploit. One Chinese friend has all his families money from China invested in houses in Ak, Ham and Wellington. He's effectively laundered all their savings via real estate and has said to me that the family now have some serious assets that are pleasingly beyond the reach of 'the party' as he calls it. So how does my experience on the ground contrast to what the study claims?

Where did these immigrants bring their houses from and how did they carry them?

'Winks'

Flawed study for a host of reasons.

Today's (closely watched) ANZ business survey ( no underlying bias ) nails the New Zealand economy further and ensures RBNZ with a further OCR cut next week. The government can continue with its migration programme ,and with lower mortgage rates provide new migrants more affordable home ownership .

Interesting. NZD already took a hit. Interesting times.

The extravaganza began again in the comment section!

"New research finds the composition of migrants has no influence on house prices, but New Zealanders moving tends to push prices up more"

David, well done for not for not succumbing to commenter's pressure as I'm sure you realise your brave article will not be welcomed by most of them

You're right, it won't be, because it is completely outdated and totally irrelevant

And well done to the majority of commenters here for managing to send valid points soaring over Yvil's head without so much as disturbing a hair.

Between 1986 and 2013? Who do you think would be fooled by that?

Oh, look, Yvil

PA, don't like the article huh, just rubbish it… LOL

I do tend to rubbish rubbish

“Both population and house prices have increased substantially since 2013, but we have no reason to expect different results. Our study covers similar strong-growth periods, e.g. 2001-2006, when average real house price increased by over 50%,”

Speculation based on nothing

Not sure if this report says anything useful.

If immigrants tended to buy lower priced houses, and they are buying them off NZers who generally would then use these funds to buy a better and dearer house, then no surprises there.

House prices are pushed up by foreign capital inflows. It's the capital that comes in that cannot find a more productive use than housing that causes prices to rise. Pity they didn't look at the details of that at the same time.

It's the other way around. The capital inflows into housing because that is the most productive use of that capital (but not the best use of productivity).
And the reason it goes into housing is because our systems create an artificial scarcity in developable land. And further the gain the capital is getting is through capital growth rather than yield.

If we removed the artificial scarcity of developable land ie zoning restrictions, then investment in housing would become more akin to any yield driven investment.

Since incomes cannot rise sufficiently quick enough to cover the extra cost to improve yield based on present house prices (and in the absence of further capital growth), house have to fall to improve yield.

This juggling of people needing income increases vs higher yields needed on property in lieu of capital growth vs falling prices needed to improve capital yield ratio is the battle we are seeing starting to happen.

Rubbish. You're both wrong.
The two are endogenous over the long run. You can't allocate a definitive causality between them.

And FYI - this research highlights that supply responses are indeed relatively elastic at an aggregate level. This is consistent with similar other stuff I have been seeing recently.
Essentially, yes, LURs (more so topographical restrictions) foster inelasticity at some TLA levels. However at the aggregate level, housing supply is relatively elastic.

This article reminds me of a little parable.

John and Dave are in a dark parking lot, and Dave’s looking for his lost keys. John asks “Where did you lose them?” Dave says “over there!”, pointing to the far corner of the lot. John says “Why on earth are you looking over here under this street lamp?” To which Dave replies “because the light is much better here!”

The first thing I would ask is who commissioned report? ...Cause I hope the tax payer didn't. 6 years old is irrelevant and out of date . Cheap local bank money, cheap foreign money, a Government that would do anything to make our GDP look good at the expense of the average citizen with slack immigration rules. That's what happened from 2013 .

Not a bad summary, David, and certainly better than what is on stuff. The punchline of the paper is not exactly amenable to a headline, but this is what I would have gone with:

After controlling for population, migrants do not have an impact on house prices, but returning kiwis do.

The coverage elsewhere seems to imply that immigration has no impact on house prices. That is not what the study found, or set out to determine.

Now do from 2012 to 2017!! A very different story. I was so looking forward to seeing the results of the last census, but seems we will now never know the true story of what happened in those years.

"NZers moving pushes up house prices"
Wow! Lets play "pass the parcel". Doesn't sound like smart economics to me. But, hey, if the bank is throwing cheap credit at you like there's no tomorrow, why wouldn't you push the envelope and bid up a price? So, maybe that's all it boils down to.
Easy credit = more activity in housing.

And data shows that lending to the residential sector has been consistently higher than lending to the business sector.