Migration driving Demand

Debatable, but it looks interesting

I looked at the migration stats a couple of months ago and thought that they seemed to inversely match demand stats for rentals in Auckland, the landing place for many migrants. It made sense but I had never explored it nor can I find anyone else exploring the relationship. I got around to it this week after finishing my Chemo & Stemcell transplant successfully.

Since the border rules were changed, immigration accelerated, at the same time the Auckland rental vacancy rate plummeted - that was the hint. Here is the data going back to 2018. Ignoring construction activity seems an OK outcome, suggesting construction only keeps up with forecast growth in demand, however the current immigration numbers could not be forecast easily by developers.

Interactive chart of actual migration here or click on the picture - https://www.datawrapper.de/_/N4Wnz/

Notice that Migrant Arrivals accelerated as Covid was announced, recall the border shambles? Then crashed once lockdown took hold, with some recovery late in 2020 to what looks like business travel. The changes in immigration rules were announced in March 2022 and implemented in July 2022 when 10,000 arrivals first occurred.

I needed to turn this migration chart over to compare with Rental vacancies over the same period, so I have plotted migration in reverse below and matched it with Auckland Rental vacancies gap with the long term average. I have indexed immigration (20,000-0 to 0-2000) to make the comparison easier to see, that involved dividing by 10. Remember this is population and there may be 4 or more people per household accounting for almost half of the vacancies used up and the rest may allow for movement to the rest of the country.

https://www.datawrapper.de/_/N93n

This looks interesting. Notice that rental stock sat relatively static over 2018-2019, at around 4,500 listings (see my Auckland charts here). Over lockdown many properties were unable to be rented due to rules, so listings dropped, but then as net migration went to zero (until 2022) vacancies started to slowly rise. Recall that NZers were returning at around 5,000/month, so that also meant non-NZers were leaving at around 5,000/month, creating vacancies around the country, but especially Auckland. Then Auckland had a lockdown and listings dropped again in late 2021.

Since the new rules applied, immigration has surged up to 20,000/month and Auckland listings have fallen from about 1,500 oversupply in July 2022 to 1,000 undersupply now. I have more recent data for listings and they continue to drop, they are now well below any previous seasonal level, see below.

https://www.datawrapper.de/_/YLJcZ/

The market will naturally correct for undersupply by slowly building more and/or prices rising to meet demand. The undersupply data is recent so it will be interesting to see how long it lasts, oversupply lasted about 1 year. Immigration may self correct if demand exceeds supply, so much so that immigrants may hold off coming - as may be occurring in Australia or conversely here.

I want to apply this to Wellington, but I think construction impacts Wellington far more than Auckland, a single apartment block can oversupply Wellington.

This is intended to be useful information, it would be great to have your comments in the chat room below, we could all learn more.