The Government's desire to keep pumping the economy with a flow of immigrants is increasingly at odds with Auckland's housing shortage

By David Hargreaves

The debate that has sprung up in the last day or so about whether New Zealand’s immigration boom has ‘peaked’ rather misses the point.

For the record, if one scrutinises the monthly seasonally-adjusted migration figures from Statistics New Zealand, it can be seen that the 5500 net immigrant arrivals in recent months gives an annualised inflow of 66,000. That’s down from an annualised figure of  somewhere between 72,000 and 74,000 based on the prevailing monthly averages of in excess of 6000 net arrivals between September 2015 and February this year.

So, yes, I think the boom has definitely ‘peaked’. But does this mean that we’re now going to see a massive reversal to a net loss of migrants as has tended to happen following past immigration booms?

I don’t think so, because I think the depth of this current Government’s contrivance and cynicism in pumping up the economy and GDP figures through particularly student workers is being misread. The immigration boom didn’t just happen – it was cultivated by government policy changes.

So, unless this Government is forced by public opinion to back away from its current immigrant-encouraging policies the number of arrivals is unlikely to fall materially.

I had seen anecdotal suggestions that the number of inbound students was falling after a clampdown on the english language requirements. But, contrary to this, in May there were 1265 student arrivals, which was up 10.9% on the numbers arriving in the same month last year.

Also in May there were 2558 arrivals on work visas, which was up 4.5% on the same month a year ago.

So, not too much sign of easing in these key areas of inbound migration.

The big likely swing factor of course is in the numbers of people leaving. Last year there were 57,000 long term departures from these shores compared with a peak exodus of 86,400 in 2012.

Okay. If we decided that this kind of surge in departures is going to happen again – and I’m not convinced it is – then this would lop 30,000 off the net annual arrival figures.

Last year there were 65,000 net immigrant arrivals. If we assumed another surge of Kiwi departures and what the heck, let’s say this moves to a new record of in excess of 90,000, this would still leave a net flow of inbound immigrants of around 30,000, assuming the numbers coming in did not drop – and it’s not in this Government’s interest for them to drop.

An annual inflow of 30,000 immigrants would represent a growth in New Zealand’s population of something over 0.6%. As some means of comparison. Britain’s current net immigrant inflow is at record highs of 330,000, which is around 0.5% of Britain’s population – and they are screaming about it over there.

So, whether New Zealand’s immigration boom has ‘peaked’ or not is largely irrelevant. We have historically high net numbers of immigrants and that’s not likely to change.

The big bone of contention of course, is where the migrants settle – and are housed.

The Stats NZ figures for the year to May show that of the net 68,400 immigrant arrivals, 31,600 gave Auckland as their final destination. This is misleading though, because some 15,600 people didn’t give a final settling destination. This means the 31,600 Auckland settlers are among the 52,800 net new arrivals who stated where they were settling. That’s just under 60% of the total. If we apply the same percentages to the 15,600 that didn’t give a destination, this gives a figure of over 9300. Add that figure to the total of people who definitively said they were settling in Auckland and you get a grand total of just under 41,000 net new arrivals in New Zealand’s largest city in the past 12 months.

As of about a year ago, Stats NZ estimated Auckland’s population at 1.454 million. Add 41,000 to that and it’s a 2.8% increase, just from migration. Stats NZ figures suggest that annual births in Auckland are running at around 22,000 and deaths at around 8000. So, that’s a natural growth in population of circa 14,000. Add that to the migration and it’s an increase of 55,000 – or 3.8%.

Based on Auckland’s current ratio of three occupants to a house, a population increase of 55,000 requires an extra 18,000 houses. By common assent Auckland has a current housing shortage. These population increase figures would suggest that if you added another 18,000 houses in Auckland in the next year, the current shortage would not be any worse. It wouldn’t be improved. But it wouldn’t be any worse.

So, how are they doing on that score?

Housing Minister Nick Smith has certainly been huffing and puffing. And just this week he was lauding the fact that building activity in Auckland has topped an all-time high of $6 billion per year on the back of the Auckland Housing Accord, the process through which developments are being fast-tracked.

Impressive dollars. But what about housing numbers?

The Ministry of Business, Innovation and Employment commissions an annual National Construction Pipeline Report. The next one is due out in either July or August. Last year’s one, which came out in July 2015 contained the graph below portraying the expected residential construction numbers for Auckland.

In commenting on that report at the time, Smith said the report indicated  “the strongest sustained level of growth in the building and construction industry in 40 years”.

“I am particularly encouraged by this report’s projections that 80,000 new homes will be built in Auckland for the forecast period of six years to the end of 2020, Smith said then, adding that the number of dwellings constructed in Auckland was forecast to increase “from 10,500 in 2015 to around 14,000 between 2016 and 2020”. Sounds good till you place it against a potential requirement of 18,000 houses in a year simply for Auckland to stand still in the face of its current shortage.

But, okay, how are actual levels of residential construction activity in Auckland bearing up against those forecasts?

Smith’s latest Housing Accord update contained the below graph:

The Stats NZ figures for the 2015 calendar year showed Auckland had consents issued for 9251 new dwellings in the 12 months. That’s short of Smith’s 10,500, but does compare reasonably favourably with the 7632 that had been consented in 2014 for Auckland.

But how has this upward momentum continued into 2016, bearing in mind the forecasts of around 14,000 new dwellings for Auckland this year? Well, stalled is the word.

The Stats NZ figures show that for the 12 months to April 2016, Auckland had consents for 9353 new dwellings. So, that’s barely changed from the position at the end of last year.

If we look at the consents issued for the first four months of this year, the total is 2780, which is up just 3.8% on the 2678 for the same period a year ago. Now, the argument might be that the first four months of the year are a fairly slow period – but of course they are slow every year.

The fact is the comparisons going back a few years are not good. In the first four months of 2012 there were 1416 consents, which was up 27.5% on the figure for the same period a year earlier. Over the first four months of 2013 there were 1669 consents – a rise of 17.9%. In 2014 there were 2155, which was an increase of 29.1%. And then last year in the first four months there were the previously mentioned 2678 consents, which was an increase of 24.3%.

So, right now, and bearing in mind the forecasts of another big increase in consents this year, right now the figures have flatlined. Whether this represents a case of temporary capacity indigestion, which is going to be followed by another upsurge of consents, time will tell. But just at the moment things look a little ominous.

Looks like the Government needs to produce an epic magic trick to get anything like those 18,000 new houses needed in Auckland this year. Or it could instead do something about the levels of immigration. Which course of action do we think looks logistically easier at this point?