We have all heard the story about nett migration lately. Interestingly the relationship between increases in house prices and nett migration is very different this time around when compared to the previous boom. This could be due to a couple of factors:
- a pro active central bank which has introduced much stronger tools by way of changes in deposit requirements
- younger migrants perhaps not buying immediately on settling down in NZ
How long can the central bank hold back this pent up demand? Building consent activity is heading in the right direction, however most agree that it is falling short of providing enough housing. Of more concern is the credit squeeze on developers which will change who delivers the supply.
Another way to view this issue is to take comfort in the fundamentals which will provide a floor for any falls in house prices. Also this all points to some strong economic activity on the horizon. Due to the changes in zoning in Auckland there is potential to supply many more houses. All we need now is favorable funding environment for developers to roll up their sleeves. Dropping the deposit requirements for home buyers at the right time could make for a sweet story.
