House prices won’t be significantly affected by a slowdown in population growth, but it does mean there will be one less driver driving up prices, economists say.
Infometrics has released new analysis that projects national population growth will slow to an annual average of 0.9% over the next decade, from 1.6% over the past decade.
The slowing pattern was expected in almost all regions, although growth would remain strongest at 1% or more around Northland, Auckland, Waikato and Bay of Plenty.
Infometrics senior economist Nick Brunsdon said natural population increase, the difference between births and deaths, is expected to slow over the next decade as the population ages.
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“At the same time, net international migration is expected to be lower than it was before the pandemic for two reasons, the government’s stricter immigration policies and fierce competition for skilled workers in most developed countries. “
The lower population growth rate and changes in growth rates between different age groups meant most regions would have to change the way they planned for population growth, he said.
“Lower growth impacts demand, so there are implications for the number and types of houses needed in a local area, as well as for infrastructure such as schools, health services and villages of retirement.”
The projections, which were part of a new service that would be updated regularly, would inform planning by councils and could help prevent an oversupply of housing, Brunsdon said.
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Population growth has only a limited impact on house prices.
“We don’t want to downplay the current supply problem, but it will give a better idea of how much housing we need in the future, so we don’t overdo it.”
Rapid population growth over the past decade has been one of the factors driving up house prices, so slower population growth could mean there was less price pressure, did he declare.
But independent economist Tony Alexander said population growth had only a small impact on prices because in high-growth areas there was usually more housing construction and, therefore, more housing. offer.
In areas with lower growth, there was less demand, and therefore fewer new offerings coming to market, he said.
“People shouldn’t get too excited about the prospect of lower prices. It would take a sustained period of very slow growth to have a big impact on housing affordability, and I don’t see that happening.
There was a risk that the construction supply response to recent population surges in some areas would exceed the population growth likely to be over the long term, he said.
“If you look at it over a 20-year horizon, excess supply is being driven by year-over-year growth by region. Additionally, there is still a backlog of young buyers, particularly in Auckland, looking to enter the market. »
Opes Partners economist Ed McKnight said his research, which covered the years 1996 to 2018, showed strong population growth was correlated with small price increases.
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After a disastrous snow season and the disruptions of Covid-19, the operator of Whakapapa and Turoa skfield went into voluntary administration.
A 1% increase in population growth each year led to an additional price growth of 0.4% per year, he said.
“With a slowdown in population growth, you might see some slowdown in price increases, but it’s not one-to-one. So if you have a 1% decline in population, you’re not necessarily going to get a 1% drop in prices.
It was also possible to have a declining population and rising prices, he said.
For example, over the period he examined, Ruapehu experienced an average decrease of 1.43% in population per year, but an annual increase of 4.67% in prices.
“That means you don’t need to have a population increase to get some degree of price growth, because there’s always a range of factors at play.”
Even though the population grew only 0.9% per year, as Infometrics predicted, that was about 37,000 more people each year, McKnight said.
“It’s still a town the size of Gisborne adding to the population every year. Does that really mean we have to build a lot less? No, because we have to house people from a different place every year. Gisborne.
The latest figures from Stats NZ showed the country’s population grew by just 0.2% to 5.124 million in June 2022, the slowest growth since 1986.
This was mainly due to a lack of international migration due to Covid-19, according to Stats NZ. Before Covid, net immigration was over 50,000 per year in the second half of the 2010s.
Immigration was expected to pick up after the Covid-era trough over the next few years, although the government’s current immigration policy was seen by many as too restrictive.