ANALYSIS: The borders are now fully open to Kiwis returning from anywhere. For the past two years many people have been of the opinion that the one million Kiwis offshore would love to be here right now. On that basis some people have bought properties and sections before our offshore Kiwis can get here and do their own buying.
The trouble is, while for the next few weeks we will at last see images of some extremely happy New Zealanders finally able to return freely to their own country, this doesn’t mean our housing market is about to receive a new upward boost.
First, it pays to note that one survey late last year found 42% of the people entering the MIQ queue to get into New Zealand were already here. They just wanted to leave then come back.
Second, we Kiwis have always travelled back home to visit friends and families during the years we are offshore. The bulk of people coming in the next few months will be doing just that for a few days or weeks, before going back to their offshore home.
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Third, we Kiwis go offshore for income-earning reasons largely. It is not reasonable to expect that when labour markets are exceptionally tight offshore and opportunities for advancement the best in a generation, that tens of thousands of Kiwis will forsake that opportunity. Doing so involves returning here for higher house prices, a higher cost of living, and much lower wages.
Many do this because they want the lifestyle we offer, especially for bringing up their children. But this lifestyle probably doesn’t involve leaving their offshore apartment to live in an Auckland townhouse.
Fourth, the sort of lifestyle we offer can be achieved with far higher income in Australia and that is probably where a good number of Kiwis in the northern hemisphere may head if they are intent on going back below the equator.
Fifth, we Kiwis for generations have gone to Australia to seek our fortunes and to test ourselves when the Australian economy is strong and demand for our labour high. That demand currently is extremely good and it is highly likely that a great number of young to mid-career Kiwis will head across to the eastern coast of Australia.
Economist Tony Alexander: Will returning Kiwis want to stay for higher house prices and lower wages? Photo / Fiona Goodall
The upshot is that there is unlikely to be a stimulus of any great magnitude to our housing markets around the country from a net flow of returning Kiwis. This seems an especially safe conclusion to draw when my monthly survey of real estate agents with REINZ is showing a net 42% reporting fewer enquiries coming from offshore for New Zealand property.
I will release results of my latest survey of agents in a few days. The so far 459 who have responded have delivered weaker readings across all of the main indicators I track. Agents overwhelmingly see prices as falling in their location and that we are very solidly in a buyer’s market. Buyers are increasingly worried that prices will decline after they make their purchase, and difficulties getting finance remain extreme.
But before people get depressed about things based on what I have written here, it pays to remember a few key things. House prices are correcting down from ridiculous levels caused by an unsustainable surge in FOMO – fear of missing out. Even if prices fall 10%, they will only go back to levels of June last year. A 20% fall would take us back to December 2020.
The labour market is very strong and that counts a lot for housing demand and the willingness of banks to finance new and current borrowers. Construction costs continue to soar, and the supply of new houses is not going to match the rise in consents issued for them to be built as some developments now fall over and many stall because of materials shortages and the coming loss of staff to Australia.
A long overdue reality check is underway in our housing market – not a crash.
- Tony Alexander is an economics commentator and former chief economist for BNZ. Additional commentary from him can be found at www.tonyalexander.nz
