Property investors hoping for demand to boost prices up when the borders open might be in for a surprise, a leading economist says.
When the borders shut last year due to COVID-19, it was widely expected house values would stall or drop as the economy plunged into recession and immigration dried up.
That didn't happen - prices rose even faster than before. In May, Statistics NZ reported a 35-year low in migrant arrivals.
It's difficult to get into the country at present - unless you're coming from a quarantine-free zone you have to spend a couple of weeks in isolation at your own expense, and - with few exceptions - only citizens/permanent residents can come without prior permission.
But once the borders are open, don't expect a flood of Kiwis rushing home to escape the pandemic overseas looking to buy homes, says Tony Alexander, former chief economist at BNZ.
"The immigration is hard to figure out, because when the borders fully open up there's a lot of people in New Zealand who will want to leave," he told The AM Show on Tuesday.
"Now, here's the trick - we Kiwis are so up ourselves about handling COVID-19 over the past 15 months that we think 1 million Kiwis overseas want to flood to New Zealand and we've been buying houses before they get in.
"Why would you come back to New Zealand when you're looking at rampant economies in the UK, US and Australia? Where we're actually going I see a lot of Kiwis leave over the next few years."
Migrant departures have tumbled even more than arrivals, hitting a 52-year low in May.
The Government last week released a 143-page document outlining its proposed tax changes, and is accepting submissions from the public until July 12. It details just how the tax changes announced in March might work, including what constitutes a new build and which landlords will have their interest payments write-off removed.
Alexander is sceptical the public's input will make much difference.
"Good luck on giving your opinion. They've decided to make a big change... the Finance Minister was painted into a bit of a corner - prices were rocketing and the Reserve Bank wasn't offering any more help, so he thought, 'What the hell - let's just slam the investors and see what happens.'
"Investors have pulled back quite a bit from the market, but they're not going to abandon it overall. Some will sell their properties, get the mortgages down lower, but they still see a rental property shortage out there, they still see an ability to make a good yield over the long-term, so you're still going to have a lot of investors out there."
That, combined with low interest rates, the strong economy and landlords' failure to follow through with threats to sell, should keep prices going up over the next year or two regardless of immigration, Alexander says.
"There's no evidence of a flood of listings at the moment at all. I certainly can see that the investors and first-home buyers have stepped back, but not many people have stepped forward to say, 'I've got to list, I've got to get rid of this thing in a hurry.' It's simply not going to happen."