Housing Markets and Migration: Evidence from New Zealand David C Maré and Steven Stillman Motu

Overview Q: How does population change, international migration, including the return migration of New Zealanders abroad, as well as internal migration impact local housing markets –Time-series relationship in New Zealand –Evidence from the literature on the US –Data description –Graphical analysis –Regressions

Background Coleman and Landon-Lane (2007) use a structural VAR model to examine this relationship and find that 1% net immigration inflow leads to 10% increase in house prices

US Literature Saiz (2003) - Examines Mariel Boatlift and finds that nearly a 1-1 relationship between the increase in Miami’s renter population and rents compared to other comparable cities Saiz (2006) - Examines relationship between immigrant inflows, rents and house values over time across MSAs using IV based on the settlement pattern of prior immigrants from same region. An immigration inflow equal to 1% of a city’s population is associated with increases in average rents and housing values of about 1%. Ottaviano and Peri (2007) - Estimate joint model of impact of immigrant inflows on wages and rents. Immigration produces a positive effect on the wages of native workers with elasticities in the 0.35 −0.55 range and a positive effect on housing expenditure with elasticities roughly between 0.6−0.8 when estimated on rents. Saiz and Wachter (2006) - Examine relationship between immigration house prices within metropolitan areas and find that values have grown relatively more slowly in area of immigrant settlement.

Population Data NZ Census 1986, 1991, 1996, 2001, 2006 –Sample: All individuals aged 18+ –New Immigrants: Individuals not born in NZ that resided outside NZ 5-years previously –Return New Zealanders: Individuals born in NZ that resided outside NZ 5-years previously –Movers vs. Stayers: Movers lived in a different place in NZ 5-years ago based on a particular geography –Local Areas: 140 Functional labour markets (LMAs) / 73 Territorial Local Authorities (county) / 58 LMAs / 16 Regional Council (states)

Housing Market Data Quotable Value New Zealand - Annual data covering on all sales and valuations at block level –Sales Prices: Mean Sales Prices for Standalone Homes and Flats in each Census year and geographic area Tenancy New Zealand - Annual data covering on weekly rents at the area level –Rents: Mean Weekly Rent for Standalone Homes and Flats in each Census year and geographic area

Sample Characteristics

Changes in House Sale Prices and Population Changes by LMA

The Relationship between the Local Population and the Local Housing Market

The Relationship between Changes in the Local Population and Changes in the Local Housing Market

The Relationship between Changes in Components of the Local Population and Changes in the Local Housing Market

The Relationship between Inflows of New Immigrants and Changes in the Local Housing Market Instrument for NewImm using the location of previous immigrants from the same region of birth (13 regions)

The Relationship between Changes in Components of the Local Population and Changes in Neighbourhood Housing Markets

Conclusions A 10% pop increase in a local labour market is associated with a 3% increase in house prices and a 2% increase in rents controling for aggregate changes over time Decomposing this change: –locations with 2 percentage point higher inflow rates of return migrants have 12-18% higher house prices and 8% higher rents. –no other components are significantly related to house prices A weak OLS relationship between new immigrant inflows and house prices, but once controlling for the endogenous location choice of immigrants, there is no relationship House prices are insignificantly different in areas within local labour markets with greater inflows of new immigs

Changes in House Sale Prices and Population Changes by LMA

The Relationship between Changes in the Local Popuation and Changes in the Local Housing Market by Year

Individual Summary Statistics

Probit Regression Estimates of Likelihood of Homeownership

The Relationship between Different Components of the Local Population