New Zealand's first post-pandemic migration wave is here! Can it fully reverse the housing market downturn?

Recently, many real estate agents across New Zealand have said they have noticed enquiries from prospective buyers who are new migrants from overseas or returning New Zealand residents rising markedly. Could they breathe new life into the quiet market?

 

Net migration turns positive for the first time since the pandemic

 

Stats NZ data shows that as of November 2022, the country recorded a net population gain of 5700, with net migration turning positive for the first time in nearly three years since the COVID pandemic began. CoreLogic chief economist Kelvin Davidson said the current net population gain contrasted sharply with the situation during the pandemic. In the year to February 2022, New Zealand recorded a net population loss of 18000. The turnaround has come much faster than previously expected.

 

Davidson said that although net migration had not recovered to pre-pandemic levels—an average annual gain of 58,000 in the preceding decade—he expected a significant increase in 2023 compared with the past two years.

 

 

Market feedback from real estate agents across New Zealand

 

Although New Zealand has a ban on overseas buyers purchasing homes, citizens and residents of some countries, principally Australia and Singapore, can still buy or build homes here. Foreign spouses of New Zealand citizens or permanent residents can also buy homes jointly with them without restrictions.

These groups can purchase property without restrictions.

Image source: Land Information New Zealand

 

Bayleys Remuera real estate agent David Rainbow said he had noticed a marked recent increase in enquiries from overseas buyers, with several properties sold by his branch purchased by overseas buyers. These prospective buyers are moving, or have already moved, into the area where he sells properties.

{ad}

 

Rainbow said that just last week he had received enquiries from several clients who had already moved here and would rent until the right home became available. One was from Singapore, while two others were from the UK and had just gained residency. They were looking for homes with a budget of NZ$5,000,000. A fourth prospective buyer had just returned to New Zealand after three years in the United States and had a budget of around NZ$6,000,000–8,000,000.

 

Ray White Wellington real estate agent Ben Atwill believes new migrants need time before entering the home-buying market. He has found that some who arrived before the pandemic are only now ready to buy their first homes. During that time, they gained residency and established credit histories to help them apply for mortgages. Most importantly, they have decided where they want to live long term.

 

As he encounters more prospective migrant buyers, he has found many are still watching the market and may buy only after the coming 6 to December. Atwill has also received enquiries from potential clients in the UK, Israel, the United States and Canada. One British client, angered by Brexit, moved to New Zealand and has been living here for some time. A New Zealand couple who have been living in Melbourne are now considering returning to pursue opportunities here…

 

Bayleys Christchurch agent Adam Heazlewood has also noticed more enquiries from overseas buyers, with most of his clients coming from Australia. He is currently speaking with a client in Singapore whose family has already moved to Christchurch.

 

Alongside returning New Zealanders, he has seen an increase in enquiries from foreign nationals. He explained that these clients often have family connections to New Zealanders, such as one couple he works with where the husband is British and the wife is a New Zealander. Overseas buyers tend to show strong interest in Christchurch's upmarket residential suburbs, including Merivale, Fendalton and St Albans. Those with children seek properties in good school zones, while buyers who value scenic surroundings are interested in Sumner, Scarborough or Kennedys Bush. He said the strongest interest in Christchurch property actually came from Auckland rather than overseas.

 

Overseas buyers eyeing New Zealand's housing market

Barfoot & Thompson auctioneer Murray Smith

 

Barfoot & Thompson auctioneer Murray Smith said that since the company began livestreaming auctions following the pandemic, its online auctions had attracted buyers and viewers worldwide. In the three months to the end of October 2022, a total of 121,000 viewers from 55 countries watched the livestreams. Although most were in New Zealand (114,000), there were also around 3000 potential buyers from Australia and 2000 from China. Another 400 viewers were from Hong Kong, China, and 380 from Hungary. Notably, over those three months, more people watched the online auctions from Hungary than from the United States, the UK or Singapore.

 

Smith said auction success rates easily reached 80% to 90% in 2021. The property market has weakened since last year, and although the auction clearance rate fell to 60% in the second half of last year, it was still 32% higher than the success rate for other selling methods.

 

Can the migration wave fully reverse the housing market downturn?

 

Davidson is cautious about whether new migrants can turn around the subdued housing market. He said continually rising mortgage rates were making things extremely difficult for new mortgage applicants. Debt-to-income (DTI) ratios could still constrain loan amounts, while high inflation remained an issue that could not be ignored in the short term, meaning mortgage rates would not fall quickly. Over the longer term, new buyers face growing pressure over whether they can afford high house prices; in the short term, they are constrained by high mortgage rates and limits on lending.

 

He added that new migrants often have no banking transaction history, preventing them from buying immediately, or need more time to decide where to settle. He believes their arrival could slow the decline in house prices, but expecting them to reverse the market's direction is unrealistic. Increased net migration should boost demand for rental properties in city centres.

201712: chart showing changes in net migration into New Zealand through December 2022

 

Valocity head of valuations James Wilson said data showed migrant buyers had accounted for only a small share of the housing market over the years, with the vast majority of properties purchased by domestic buyers. Migrant buyers are also spread across different price brackets: some compete with first-home buyers, while others compete with high-net-worth buyers. This makes it difficult to classify them as a single typical buyer group.