Why houses prices keep on rising?
NZ house prices have gone up compared to last year. While the Labour party and other opposition parties are blaming foreigners for pushing up the house prices, this is not entirely true.
Here comes the news: Just over 3% of the homes sold in New Zealand between April 2016 and June 2016 were sold to non-residents.
So the majority of people buying NZ residential property are either NZ residents or citizens.
The places which do have a problem with overseas buyers are the likes of London and Canada. In fact, from 2 August 2016, any foreigner purchasing residential houses in Vancouver have to pay a 15% tax to the government.
One thing that is true is that there is an increasing trend of people migrating to NZ. Foreigners are finding it increasingly difficult to migrate to UK, Australia and Canada, so New Zealand is their next choice. The latest net migration figures provided by Statistic New Zealand show that net migration is approaching 70,000 annually. Compared this to 2014 (whose net migration was around 40,000) and 2015 (whose net migration was around 60,000), we can see that migrants coming to New Zealand is one of the key drivers of growth in property prices.
If we look at the chart above, we find that in for the year ending 30 June 2016, almost half of the net migration to New Zealand is concentrated in the Auckland region. That explains why Auckland has been enjoying solid house price appreciation. This hasn’t even taken account local migration from other areas of the country to Auckland. When that is taken into consideration, we begin to understand the driving force of house price appreciation in Auckland. Wellington, Waikato and Canterbury also had increases in net migration and also have enjoyed house price appreciation in recent months.
Other forecasters have been sounding out that the property market is overheated. Is it really? With so many people coming to NZ, do you really think it is overheating? So here is hint when trying to spot signs of a weakening property market: tune in and take note when the government decides to make changes to immigration policy. Any regulation which puts restraints on migrating to New Zealand would definitely cause the housing market to slow down. And is rising house prices really a bad thing? Well that’s a topic for another post.