Migration Impact on Rentals
Migration has returned to the Long Term Trend
Apparently migrants rent before buying, I accept that because it is what I would do, but there is no data to support that assumption. This blog is an attempt to understand migration impacts on property investment and discovers there appears to be very little specific impact apart from continuing growth of the market.
Assuming migrants rent first, then investors are better informed if we know a little bit about them. This post is about understanding more about migrants potential renting capability or intentions. The post also explores the murky detail of migration statistics to save you the effort.
Researching Govt sites I quickly discovered that Stats provide two critical bits of information that may help, but they need some explanation. They are:
Permanent Long Term migration (PLT) by Occupation - a self reported field in the passenger card you fill on arrival.
Income by Occupation of New Zealanders.
These series both use the ANZSCO definition of occupation, which is handy because I can group both sets of data into common groups. However, care needs to be taken since the two sets of data are on different populations. The first group is self reported so may not be accurate, however it is all we have. My use of #2 is restricted to identifying how well paid each group of occupations are.
Income groups by Occupation
ANZSCO Groups are high level, they do have minor groupings which Stats specify down to say Nurses and doctors for income, but not for migration. The major groupings for NZ employees are:
Major Group: 1 - Managers
Major Group: 2 - Professionals
Major Group: 3 - Technicians and Trades Workers
Major Group: 4 - Community and Personal Service Workers
Major Group: 5 - Clerical and Administrative Workers
Major Group: 6 - Sales Workers
Major Group: 7 - Machinery Operators and Drivers
Major Group: 8 - Labourers
Average incomes in NZ for these groups fit three categories, 1&2 averages are almost the same, as are 3,4&5, and 6,7&8, allowing me to use just three groups when comparing migrant ANZSCO data; I define high, medium and low in the following charts using common colours.
The next chart uses the same colours to help understand the size of each immigrant group, again using the ANZSCO specifications. Ie the high income group, including teachers, doctors and nurses (the big employers) dominate with 45% of immigrants (note, non-earners including retirees, children or students are ignored in the migration by occupation stats).
So current migration is actually into well paid jobs, not the low paid jobs we frequently see referenced in the media.
Changes over time especially during the pandemic of course are extreme, but all three grops appear to be back to the levels prior to the pandemic;
While changes in immigration numbers were extreme during the pandemic, the latest data strongly suggests we are already back to the long term trend for all three groups. The burst in medium income group numbers in 2023 was due to our construction industry, clearly that stopped as the industry slowed and may now be falling below the trend.
The following chart zooms in on the above data both in time and into the most common “minor ANZSCO” groups, with these top occupations shown to provide some context to the summary chart above. The chart uses selected occupations using the income groupings above but from March 2018 to March 2024.
Notice how very few occupations have more immigrants now than in March 2018, only Doctors, Nurses and Labourers have increased. The occupations with big rises in numbers in 2023 are back to past immigration levels already. Note also NZ Arrivals over the years 2020 to 2024 are below the level of expected arrivals had there been no pandemic, ie the gap during the pandemic is smaller than the peak after.
Some cross checking:
Total PLT for 5 years to 2020 = 247,000, while to 2024 = 210,000 (worker arrivals only)
Total Estimated migration for 5 years to 2020 = 605,000, while to 2024 = 503,000 (all migrant arrivals)
These numbers look to be reporting the same people by different methodologies and both show arrivals to be a little less now than 5 years ago when including the pandemic with the catch-up.
Impact on Property Investors
So what does this mean? Migration was constrained for a few years, then bounced back to almost previous levels after a bit of catchup. Income levels for migrants look to be similar to the long term trend, ie close to 50% of migrants are in the high income groups.
My take is:
Migration arrivals are mostly for high income occupations.
Short term migration changes returned to normal quickly.
NZ lost some migration arrivals due to the pandemic that have not arrived in the catchup of 2022-23.
New immigrants are more likely (45% of them) to rent in premium locations due to their income levels.
Media hysteria about migrant numbers being over 200,000pa remains hysteria, migration arrivals from 2020 to 2024 is probably less than the five years prior to the pandemic, NZ stats are however not good enough to prove either way.
My own experience fits the above, we have experienced many tenants with high incomes who are new immigrants, who move on to buy their own home. The data confirms the previous long term trend will continue.
There is unlikely to be any impact on property investment from migration changes where the migration trends remain consistent with our past experience.
Caveat
This analysis is based on the Stats dept PLT series, which is an intentions based measure using travellers intentions when arriving. This data is no longer the official migration statistics which is the Estimated Migration statistics using actual travel histories of people. Estimated migration has the problem that it is inaccurate for 1-2 years while they await the next move of individuals and is limited to passport and visa data. To get this more accurate measure of total migration, Stats have moved to a system where “a traveller is classified as a migrant based on their actual movements”. My gut impression is that this change will be changed when Stats discover travellers move many times after migrating - visiting their family at their home country - they can afford it if they are mostly in jobs with good income
However this applies: “The outcomes arrival and departure estimates are consistently higher than intentions PLT estimates” so arrivals are consistently higher than the PLT estimates above, however outcome estimates only focus on passport or visa type and do not include categories like occupation.
Managing a liquor store or vape store probably doesn't command the same income as some other managerial positions.
Migrants rent because they have to by law - the Foreign Buyer ban prevents them from buying a home, and those with Resident visas have to wait 12 months after moving to NZ to qualify as "ordinarily resident" and exempt from the FBB.
You should also not assume that the migrant category of "manager" is highly paid. This category covers the huge number of immigrants brought in to work as "Restaurant Managers", "Liquor Store Managers" and "Retail Managers" when all they really are are waiters and shelf stackers.