Migration and the property market in 2016
- By : Daniel Carney
- In : Residential Investment Property,Residential Investment Property Market Updates
- Comments : 0
For the sixteenth year in a row, New Zealand has experienced a record-breaking number of migrants.
Statistics New Zealand reports a net gain of 6,300 migrants in November this year alone. Across the whole of 2015, there were 120,900 migrant arrivals and a mere 57,200 migrant departures. While many of these arrivals are in New Zealand only temporarily, visiting with student or temporary work visas, those using property investment to build wealth are gearing up to provide housing for the inevitable increased demand.
Whether through direct investment or through fund managers, those who get in early have the chance to make major gains by catering to the additional migrant population.
Auckland predicted to end up on top
An increase of 1 per cent to the population of an area from migration caused an 8 per cent increase in local house prices over the following three years.
It is likely that it will be Auckland that will benefit the most from this increased demand. With half of all migrants arriving in New Zealand moving to the Auckland region according to Statistics NZ, it is likely that increased migration will have a major effect on housing prices across the area.
So what kind of growth can we expect from our new residents? The Reserve Bank of New Zealand showed that an increase of 1 per cent to the population of an area from migration caused an 8 per cent increase in local house prices over the following three years. New building investors are also likely to gain, as the same study showed that a new house is built for approximately every six migrants. To put that into perspective, that would mean over 1,000 new homes built across New Zealand for this year alone!
Selling or rental?
A study from the New Zealand Treasury described how migrants generally went into rental housing when they first arrive: perhaps to acclimatise to NZ property before deciding to purchase one. It took up to 15 years for immigrants to reach similar housing choices as native-born New Zealanders, so unless you are looking quite long-term, it may be best for you to invest in a rental residential investment property, rather than relying on increased demand and selling at a higher price.
However, Auckland is not the be-all and end-all of investment property. Plenty of opportunities exist in other city centres such as in Hamilton and Tauranga. However, as fewer migrants move to these places initially, the demand may not be as pronounced as in the nation's largest city.
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