VIEW: ASB Sees Uncertainties Around Migration Keeping RBNZ On Hold

REINZ data showed a strong pickup in house sales in February driven by rising demand as inward migration remains robust, but ASB expects arrivals to slow. Home prices began to recover in Q4 last year and as transactions lead prices, they should continue rising, weighing on housing affordability (see MNI Residential Building Needs To Recover To Meet Demand).

• ASB expects “that moderating inflows of non-NZ citizens will drive net migration inflows, but the uncertainties involved suggest that the firmly on hold stance from the RBNZ is prudent.”
• While estimate migrant arrivals rose only 2870 in January, upward revisions have been large with December revised up over 3k and November by 6.4k, which was originally in line with January’s reading. Net migration in the 12 months to January was +137.4k but ASB says that the data is volatile as Stats NZ needs to observe sixteen months of travel data before it can classify a border crossing as a migrant movement”.
• ASB observes that inward-bound tourists rose above 3mn annualised, “but strengthening resident short-term departures will likely reduce the economic boost”.
• REINZ house sales rose 37.9% y/y in February but ASB notes that 2023’s cyclone plus the extra day from the leap year are “muddying the waters”. The rebound in sales was “driven by a burst of activity in Auckland”.
• “Sales activity will need to remain robust to keep a lid on anecdotes of rising inventory. Nevertheless, strong population growth is likely to continue to underpin demand for housing over 2024.”