A flood of student migrants who will move into the workforce and want their own homes has serious implications for the housing market

Migration is easily the biggest driver of population growth in this country which means it has a major impact on the property market.

In the year to June, migration increased New Zealand’s population by 58,259 people.

While it is the effect on the residential property market that usually gets the most attention, migration driven population growth also affects the commercial property sector because migrants become employees and consumers, helping to drive demand for space in commercial buildings.

Migration delivers population growth when the number of people arriving here (on a long term basis) exceeds the number leaving to live overseas.

The accompanying graphs show the long term trends (June year 1992-2015) for both arrivals and departures and the resulting net gain in population.

The most obvious recent trends are that between 2011 and 2013, the number of people arriving here was more or less matched by the number of people departing, so that over that entire three year period, population growth from migration was just 8583, or an average of 2861 people a year.

Then in 2014 the number of people arriving here long term grew sharply, rising from 88,235 in 2013 to 115,655 in 2015, an increase of 27,420 (up 31%).

Over the same period, the number of people leaving the country dropped from 80,328 in 2013 to 57,396 in 2015, a decline of 22,932 people (-29%).

That combination of more people arriving and fewer people leaving led to explosive migration driven population growth, which climbed from a gain of just 7907 people in the year to June 2013 to 58,259 in the 12 months to June this year, a 637% increase.

Such a large and sudden increase in population puts obvious pressure on the housing market, particularly in Auckland where there was already a housing shortage and where it is believed up to 60% of migrants settle.

However to better understand how the housing market is affected, we also need to consider the type of people that are migrating to and from this country.

This has changed considerably over the last two years and one of the biggest changes has been in the number of people going to and from Australia on a long term basis.

In the year to June 2013, just over 48,000 people left this country bound for Australia while 16,781 came back, leaving a net loss of 31,246 people who headed across the ditch.

Over the following two years, the number of people leaving this country for Australia declined by 47% to 22,781, while the number coming here from Australia (around two thirds of who are New Zealand citizens) increased by 43% to 24,061, reducing the net loss to Australia to 1185.

So in approximate terms, the number of people leaving this country long term for Australia is more or less balanced out by the number coming back.

The other major trend over the last two years has been a big increase in the number of people coming here from other countries.

Growth in migration from India has been particularly strong over the last two years, with the net gain from that country rising from 5120 in the year to June 2013 to 12,031 in the year to June 2015, an increase of 135%.

Over the same period the net migration gain from China increased by 53%, from 5224 to 7995, which means India has now overtaken China as the biggest source country for net migrant inflows to this country.

The accompanying table shows the main source countries for people migrating to New Zealand, how many people came from each of them and the types of visas they arrived under.

It also shows how many people departed from New Zealand for those countries and the resulting net gain in population from each country in the year to June.

Significantly 76% of the long term arrivals from India were on student visas, and 48% of arrivals from China were also on student visas.

It is often assumed that people on student visas are only in this country temporarily and will return to their homelands at the end of their studies, but that is not usually the case.

That is because government immigration policy encourages people to come here to study as a preliminary step to obtaining permanent residency.

Under the government’s points system by which migrants qualify for residency, they get points according to the level of their qualifications, for example, 50 points for a bachelor degree or 60 points for a post-graduate qualification such as a masters degree.

But they also get bonus points if those qualifications are obtained in this country - 10 points for two year’s full time study in NZ towards a bachelor’s degree and 15 points for two years of study in NZ towards a post-graduate qualification.

This makes it easier for migrants to obtain New Zealand residency if they have studied here and the numbers suggest that most are doing so.

The table shows that in the year to June, 13,266 people came to this country from India on a long term basis but only 1235 returned in the opposite direction, suggesting that most of those who come here to study end up staying here.

A similar trend can be seen in the numbers from China, with 10,253 arriving the year to June 2015 including 4877 on student visas, but only 2257 heading back to China.

That has important implications for the housing market and the broader economy, because 57% of migrants who settled in this country over the 12 months to June were aged from 16 to 29 (refer to the accompanying pie chart).

Most of those new arrivals will probably be looking for rental accommodation initially, perhaps in a flatting situation, while they complete their studies.

But once they finish their studies, get a job and look to start a family, they will likely move into the first home buyer’s market.

This will be adding substantial demand pressure for cheaper housing, particularly in areas such as Auckland, where there is a large student population and a shortage of affordable housing.

In the year to June, this country’s population increased by 86,900 people, with migration accounting for 58,300 of those and the natural increase in the population (the excess of births over deaths) accounting for just 28,700, according to Statistics NZ.

That means migration is by far the biggest driver of population growth and consequently of the demand for new housing.

Opening the door to migration provides an immediate economic impact, by channelling funds to tertiary education institutions, boosting retail sales and providing a pool of skilled labour to employers, which also helps to keep wage rates down.

That’s the easy part.

Making sure there’s enough places for them all to live and that infrastructure such as transport, health and education services can cope with the growth in demand that migration creates, is a lot harder.

If it comes at a time when existing infrastructure is already under pressure, as it is in Auckland, it could be a case of paying for short term gains with long term pain.

This article was first published in The Property Line Quarterly Report which is published by interest.co.nz and sent to subscribers of our regular Property Newsletter. Both the newsletter and the Quarterly Report are free, we do not share subscribers' details with third parties and you can unsubscribe at any time. To subscribe to The Property Newsletter and receive the Quarterly Report and all of interest.co.nz's other property-related stories delivered free to you inbox, enter your details in the subscription box below:


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37 Comments

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13

One word - ridiculous. Population growth climbed from a gain of just 7907 people in the year to June 2013 to 58,259 in the 12 months to June this year, a 637% increase.

Journalists and politicians are out of touch.

Need to step back and look at the longer term, there are big dips as well as peaks. As was raised elsewhere, NZ is a nice place to live, but most movers and shakers move out due to lack of opportunity and distance from markets. A line through the guts of the nett migration chart looks like 12-15K pa on average inflow. That seems about right to me. Was there the same whining 1992-96 and 2000-04?
Lets see the actual breakdown of time spent in country, see how many stay longer than 6 years.

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10

But the Aussie economy has cooled considerably so more Kiwis are heading back or staying for shorter periods in aussie, but there has been no adjustment in how many immigrants are allowed in each year, so the net inflow is much larger now. There's plenty of countries with populations similar to NZ's who do very well, we don't need to buy into this rubbish about needing to have a bigger population, that's just more of the constant neo liberal rubbish we are being fed on a daily basis now.

Government needs to step up and look at the longer term impact of high immigration flows. I think it just means less fish for me.

Could we please see a chart of % gain in Auckland house prices and net migration gain plotted together.

You will note the very close correlation.

If you combine internal population growth (just the deviation from the long term average) then you will get an even better correlation. (Note internal population growth still shows variation as a shadow of the death toll in WWI and WWII followed by the baby boom. Hence in the late 90s there were less first time buyers (grand children of WWII veterans) and in the early mid 00s there were more FHBs (grand children of baby boomers).

So given the correlation with house prices and given we know what internal population growth is doing and that we know how many are departing then why not use the word I am forbidden to utter (starts with i, second and third letters m....ends in n) to control house prices??

Also of note, a factual report only as I'm banned from opinion on this issue: renting a Chch flat recently, 25 out of 26 people who viewed at two open days were of Indian decent. A fact not an opinion.

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10

And don't forget .. the National government just last year changed the student visa conditions in order to ALLOW students to work here while studying!!!!

Very flashy promotional campaign to go with it titled: NZ Study + Work;

http://nzstudywork.immigration.govt.nz/

And hence, they came in droves - pretty much the sole reason for the massive increase in students from India.

A terrible policy just another way to flood the market with minimum wage workers and keep down any wage inflation

It's the export policies.
If they were not allowed to work or to get residency after their studies, do you think they'd come to NZ?

Yep. Did you notice that the government never spoke about education as an export earner until such time as dairy went south? Silent about what they were engineering in the background. And NEVER did they mention overseas students as a likely front-runner in the AKL housing supply issue .. yet havbe known it all along.

These students are going to feel duped when the next government tightens rules and they don't qualify for permanent residency.

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18

There you have it. Pushes housing up and keeps wages down.

Screws the life chances for real kiwis.

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16

Seems the sort of immigration we have is just of no benefit to New Zealanders. So we should not allow it. There is no information that a bigger population benefits us at all.

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12

A while ago I did some analysis comparing the GNP growth rate per capita versus population growth rate for most of the countries in the world. The results were that there was a mildly negative correlation. Some of the wealthiest countries with the highest economic growth rates have actually got shrinking populations. When you think about it it makes sense because a greater percentage of the economy can be directed at export earning products and services. High population growth rate economies are hampered by the capital costs and proportion of the productive economy that must be directed at producing new houses, roads, schools etc. etc. for the ever increasing population. None of this earns the country any income. Its like running a business and employing lots of new staff who are running around building new offices for themselves, setting up new management structures for themselves etc.
I interpret it as a very short sighted and lazy way of appearing to boost an economy that governments of all colours have fallen into. It is like a 'make work' scheme on a grand scale or just a simple ponzie scheme that successive governments are too scared to stop.

Who says it's not a benefit for NZers?
As per my comment
http://www.interest.co.nz/property/77186/flood-student-migrants-who-will...
it's precisely the increase in population the result of increasing our exports (through the education business attracting foreign students that unless they can become residents they wouldn't spend their money in NZ)

It's a matter of choice and sustainability. But there is benefit for NZers, at least in the short term..

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12

Time to talk about when this Ponzi scheme gets kicked to the kerb.

wrong place

Got to keep the ponzi fake economy going by flooding the country with immigrants each year, while head in the sand kiwi's watch Mr Biased Hosking each night and think it's all happy days.

Looks like life's gonna be good in landlord land for a while yet.

Knew we could count on you to be rubbing your hands together at anything that keeps house prices up and wages down. Gives your lot a nice continuous supply of rent prisoners to keep lining your pockets.

would not be surprised if landlord is renting by the room and squeezing 20 to house.
with his attitude towards people (sees them as cash cows)

nah, that's things like high LVR.

Knew I'd get you going dontgetmegoing. But... don't believe everything you say. It's not always the case.

Have been in Copenhagen and Oslo in recent days. Both have a major house price problem but with much larger salaries than Auckland. Nowhere near the proportion of Asian faces here. A big flux of Asian tourists. I presume they are mainly Chinese mainland based. Talked to Hong Kong guy travelling in our group. They have a resentment against the Chinese mainland flow and they are the same race!

What they're all Han?

ace is such an incorrect word.
We're all of 1 human race: homo sapiens sapiens.
.
57 minorities live in China.
93% of people living in HongKong are Han Chinese.
According to wiki.

Someone posted this a couple of days ago.....this is the graph that the media should be jumping on. A must read..

http://croakingcassandra.com/2015/08/18/skills-based-immigration-who-has...

the figures show what a rort it is self stacker is a skilled job give me a break meanwhile many many born and bred kiwis can not get a job because they are too old or too qualified.
and what about the pressure it causes on housing
An Auckland Council report released in 2014 showed there were about 15,000 "severely housing deprived" people in Auckland
we are really turning into every man for himself society and I hate to think where NZ will be in 10 to 15 years.
I am getting used to more and more stories of corruption appearing, next to follow will be a increase in crime

how is it a rort?

If you look at history, when a economy gains a middle class, fewer want to work in long hour, low condition, minimum wage jobs. We then tell our children that they should be educated, go to higher education and told them to stay away from trades. And because we believe our children deserve better, if they don't go on to education, they are necessary push into these low paid jobs, and instead full on to the support of the taxpayer in the form of benefits.

We need immigrants to fill these positions, and for them a low paid, long hour jobs is better than what they are use to, and quite often there is no Government support from where they have come from.

We have created his position, because we feel we are better than the opportunities that are before us!

We don't need immigrants to fill those positions. Many NZers would be keen to work there...if it was affordable or socially-equitable. By socially equitable, things like taking half your year off from your family to pick fruit in the bowels of the SI, is social career suicide compared to doing nothing in Auckland/Hamilton - you can kiss goodbye most of your friends and relationships.

Also many of those "lower" jobs pay pathetically, not enough for a person with NZ family or career to support themselves (vs buying out of a oppressed or third-world economy)...all the money ends up lining the CxO's perk cabinet or putting some fad paint in the corporate foyer (I still remember finding out that junior staff in one organisation didn't get pay rises one year because "no money" but the company re-imaged their corporate foyer... one painting -alone- cost the same as 5 FTE junior's annual wage. And that wasn't the center piece.)

Pay the low end staff more, cut the fat off the top and the BS, put in place part-time positions for some of those jobs (eg 3-3-1 weeks ... forget the 10+hr workday for labouring positions). avoid companies that don't do it. you'll see economic growth. Ecnomic growth doesn't come from the CxO getting upsold on the next range of corp car, or redecorating at home, or extra green fees.

Speak for yourself happyatwork, I work in the tourism industry and 80% of my colleagues are from overseas, most on working holiday visas, but quite a few get sponsored on work permits, because the company has an arrangement with Immigration. They can't attract enough Kiwis, because the pay is scarcely above minimum wage and I can personally attest that its insufficient to support a local in any measure of comfort. If the weather is sufficiently bad the workplace closes down. No work. No pay.

Many young people from Europe and North America consider the job to be a short-term lifestyle choice and worthwhile to suffer a bit of discomfort for a few months.

Significantly 76% of the long term arrivals from India were on student visas, and 48% of arrivals from China were also on student visas.

The majority of the immigration gains are through the education system: foreign students, mainly from China and India, who come to study in New Zealand and gain residence afterwards (and maybe later bring parents under reunification category)

So.. yes, there is a BENEFIT for ALL New Zealanders in the way that the more international students come to NZ the more foreign capital we attract. It's like EXPORTING, it's never bad for our economy.

Now it comes the interesting part. Do they come because of the amazing NZ education system? because the prestigious Universities? NO.
NZ education is very very average (I'd say in some sectors is even below average international standards). They come to study here because they want to live here, and the education system is just a good back door for immigration. Good for them, good for us ...for now (because it's not sustainable as you all can see)

If the immigration law changes and students cannot gain residency after finishing their studies they will simply stop coming to NZ and our economy will export less.

Want to set a more reasonable immigration levels? Very well, I agree, but then be prepared for lowering even more our currency, having more expensive imports, more expensive holidays overseas, less baby boomers getting richer through renting/selling assets, less services around education (accommodation, retail, bookstores, transport..)

The times where we can export to the world with low population taking all a big piece of the cake are gone. The options to keep the same wealthy lifestyle are: increasing population and/or increasing exports like education (because milk and other commodities are not profitable right now)

..ah yes, and selling properties to each other in a wealth transfer from younger to older generations. At least while the illusion of wealth on this ponzi scheme lasts.

The future of economics can be summarized with the sentence "A race to the bottom"
It just happens that NZ is in a good position to attract population and soften the impact of the race by increasing exports (attracting students) while boosting local demand.

Very few NZers benefit from students studying here.

Realistically it is the pseudo education institutions (who enrol students but don't teach anything much) and the scallywag landlords who pack them in to houses by the dozen that make the only profits.

The country doesn't exactly benefit from the extra spending they do on petrol and food!

So very limited benefits unless they are actually enrolled in decent University level courses and paying full foreign fees.

From the foreign students, yes. They pay considerably more and contribute ethnic expansion for people who wouldn't otherwise meet and live alongside foreign people at a young age. Great way to find out *really* how the people back home think and explode (or confirm: re-Asians and photo-ops :) ) myths.

Encourages links to foreign corporations beyond just IP sell-offs too. Not only is there the openness and cross-cultural connection brought about by a shared person, it also encourages that student and their peers to work internationally between the two countries as well.

What we can't have though, is the education back door to immigration.

Fair enough Munti and I don't know of anyone opposed to foreign students coming here to study. Many are concerned with the fabricated (usually by their own countrymen and women) bullshit courses that reflect badly on our country and are of limited value to the students themselves. Further, if, as i understand it these "students" are permitted to work here then what is the real value to us? Certainly no great "export" value there and it tends to force down wages for us Kiwis and especially for those in greatest need. Perhaps we need to look at our welfare system, as I believe we are doing, to make it more attractive to work than live on a benefit. That equation is certainly not helped by undermining the very base of the wage structure with low quality mass immigration.

"Perhaps we need to look at our welfare system, as I believe we are doing, to make it more attractive to work than live on a benefit"

Its just not economically viable to offer low end jobs in NZ; and the NZ cost structure is such that its currently not worth people to take them. So most jobs on offer are out of reach to the staff available.
- And I speak from current experience ...that if those staff do extra training, the minority that do not drop out from life issues, will spend most of their time doing wasteful academic BS to make up points, rather than getting the skills most needed.