New Zealand saw a record number immigrants in 2016 with economists expecting migrant inflows to keep rising.
Of the new migrants who arrived in the year, a net 33,900, or 48 per cent, settled in Auckland, with Canterbury, Wellington and Waikato being the next most popular destinations.
Annual net migration hit 70,600 in December 2016, with the biggest net migrant gains from China, India, the UK and the Philippines. Migrant arrivals rose 4 per cent to 127,300 in the year, also a new record, while migrant departures dipped 0.5 per cent to 56,700.
Satish Ranchhod, senior economist at Westpac, says “These trends are expected to continue to some time, with NZ’s positive economic story, including its labour market, making it a very attractive destination. We expect net migration inflows to remain strong for some time,”
Further declines in home affordability have been highlighted in a report by Massey University.
The report covers last September, October and November and shows affordability dropped by 2.8 per cent nationally, with some larger declines in Taranaki, Northland, Southland, Nelson/Marlborough and Manawatu/Whanganui.
The Massey University Home Affordability Report says Auckland and Central Otago Lakes remain the country’s least affordable regions and that Auckland’s median house price reached a new high in November of $851,944 — a year-on-year increase of $86,944.
Author of the report, associate professor Graham Squires from Massey’s School of Economics and Finance, says there are nine regions that show greater annual increases than Auckland.
Home prices in Central Otago Lakes increased by 31.9 per cent over the past 12 months, while Nelson/Marlborough increased by 24.3 per cent. House prices in Taranaki increased by nearly 20 per cent.
The ratio of median house prices to median wages in New Zealand remain “very high”, Dr Squires says, and this puts a strain on first-home buyers.
One region showing a strong improvement in home affordability is Canterbury.
Squires says: “Steady reductions in the OCR over 2016 equate to an 11 per cent reduction in mortgage interest costs, easing the burden for home owners. But more stringent deposit requirements and tougher rules for bank lending could start to reverse this trend, especially for first-home buyers.”
If anyone wonders why it’s so hard to build a home in Auckland, I can give you the answer. It’s $270,000.
A friend is subdividing to build a modest single-storey home in their backyard.
Construction hasn’t started yet, but in the two years since his plan was hatched he has spent $270,000 — mostly on council fees. The rest for a concrete drive and a hook-up to the drains.
Is it any wonder we have a housing shortage in Auckland?
Body corp reforms
Apartment owners across New Zealand could soon be protected from rogue body corporates if the country’s first peak strata property body gets its way.
The Strata Community Association is using a government review of the Unit Titles Act to push for greater regulation of strata managers, which it says would protect apartment owners. Strata Community
Association (NZ) president Joanne Barreto says: “When you have no professional benchmark for individuals and companies in such a huge sector like strata property, things can go rogue pretty dramatically, and that’s exactly what we’re aiming to change.”
Interest rates to rise in 2018
Nick Tuffley, chief economist at the ASB is predicting a hike in the Official Cash rate – currently 1.75 per cent – in 2018. So still some time away. But that doesn’t mean banks won’t be increasing rates due to global financial pressures and profit taking.
Tuffley says inflation is creeping up and strong tourism numbers are putting pressure on the economy.
While Inflation at the end of 2016 bounced up to 1.3% after languishing below one percent, Tuffley says that isn’t a dramatic surprise.
He expects next week’s RBNZ Monetary Policy Statement to have a lot more confidence in the inflation outlook.
He says: “By our estimates, inflation will now be comfortably close to the 2% mid-point of the target band fairly early on in 2017 and persist near 2% thereafter.”
Tuffley says inflation may struggle to maintain its 2 per cent level over the next few years, citing the impact Donald Trump’s presidency will have on New Zealand exports.
He adds that the local interest rate market got ahead of itself in pricing in a full OCR increase by the end of 2017.
He now expect the OCR to start rising by late 2018.