Immigration: the house price elephant in the room

[PeanutButter]

This is from the Spectator Australia and I might have followed the link from someone on here (sorry if posted already). What I think is interesting is that immigration is not really allowed to be mentioned in relation to house prices in the UK either but it stands to reason that a resource that everyone needs/wants will go up in value the more people there are to need/want it. Right?

Australia actually seems far more addicted to the temporary uplift that inward migration yields. How long can it go on? I would have liked some citations in the opinion piece though.

https://www.spectator.com.au/2019/02/immigration-the-house-price-elephant-in-the-room/

Quote

 

It speaks to the shallowness of Australian democracy that the obvious is now very seldom spoken. A wide range of economic and social issues are now encased in thick plaques of unreality that result in serious policy discussion rarely being entertained. This is particularly true of immigration and its impact on house prices.

Property industry consultants, economists and building industry advocates are loath to mention the simple fact that immigration drives up house prices. The straightforward notion that directly increasing the demand for housing, by deliberating expanding the number of people looking for housing, is apparently beyond their capacity to admit publicly.

The reticence to concede basic economics is a function of Australia’s stifling business and political culture. Housing sector lobbyists and property analysts are bought and paid for by the construction industry, so they are effectively paid to keep quiet. Market economists on the other hand are afraid to appear anti-immigrant for fear of alienating the corporate sector and incurring the wrath of progressive politicians.

Very limited pockets of independent thought do occasionally allow the obvious to be mentioned, but even then, it’s only in passing and without serious examination. An honest and complete exploration of the effects of immigration on housing prices would quantify its impact and facilitate our understanding of an obvious policy lever for alleviating the housing affordability crisis currently being experienced in Sydney and across the continent.

The bottom-line is that conservatives in Australia are orphaned intellectually. There is no voice of reason to examine the obvious case for dramatically lowering the immigration intake to address the housing affordability crisis.

The policy issue, of course, centres on how large an impact immigration has had on house prices. This is where economists should come into their own and offer deeper insights into the trade-offs between housing affordability and stronger population growth driven by immigration policy. The fact that, with some notable exceptions, economists haven’t made a significant contribution to the debate speaks to the desperate state of the policy environment.

The economic literature on the topic all points to a positive relationship between population growth and house prices. There are varying estimates of the elasticity of house prices with respect to population growth from studies across the globe, each reflecting different domestic conditions. Despite occupying an entire continent, Australia is one of the most highly urbanised countries in the world and constraints on development in our cities limits the ability for new supply to moderate demand pressures on housing markets.

Closer to home, an economist at the Reserve Bank of New Zealand has estimated that for every one percent increase in the population across the ditch there will be an eight percent rise in house prices over the next three years. The estimated effect is large and immigration alone in New Zealand over the last five years led to a more than five percent increase in the population.

House prices have skyrocketed in New Zealand as a result and Auckland now ranks fourth in the list of least affordable housing markets in the world. It’s not hard to see why the conservative government of Bill English lost power in the face of a Labour Party committed to reducing immigration numbers, however phony those election promises.

While there’s a dearth of literature in the Australian case we can take guidance from a range of sources. Australia is a much larger country than New Zealand, so what appears to be a greater responsiveness of supply should ease the pressure on house prices, suggesting a lower estimate. International estimates of the elasticity of house prices with respect to population also tend to be lower than the estimate for New Zealand.

One economist has told me privately that using conventional econometric techniques it is relatively straight-forward to show that the long-run elasticity of house prices with respect to population growth is somewhere between two and three. When asked why he hadn’t published his finding or drawn attention to their policy implications, he ominously stated “career implications”.

Immigration is one of the key drivers of house prices in Australia. Politicians from both major parties have pushed one of the world’s largest immigration programs on the Australian people for a generation with the effect of pricing many of them out of the housing market.

This is particularly tragic for our young people, many of whom now consider home ownership an unattainable goal. Young couples have clearly deferred starting families to instead save for a deposit on a home. These impacts of housing affordability have fed directly through to rental markets. Anyone trying to rent in Sydney knows it’s an absolute nightmare and life is constantly disrupted by a game of musical apartments as leases come due.

It’s not as though both major political parties didn’t know this either. Treasury will have told all the cabinet ministers in the current government that immigration increases house prices; they’ve just been too craven to admit the fact to the electorate publicly.

A stale and intolerant political class has insisted that the public can not be allowed to know the truth for fear of undermining support for an immigration program that no one really asked for in the first place and, had they been given the option at the ballot box, would have been roundly rejected.

This is not a feature of our democracy that serves us well, or that should inspire trust in our politicians. The harsh thought policing of public discussion around the issue of immigration has been extreme and speaks to the shallowness of policy debate.

Australians now have a generational opportunity to break the intellectual stranglehold of a failed political elite. Only honest debate and the courage to stare down vested interests will make us capable of moving policy in a positive direction. Dramatically reducing immigration is necessary to ease pressure on housing markets and that alone, as a fundamental component of a conservative policy platform, dramatically sets us apart from the major political parties.

 

 

[kzb]

It's always seemed bizarre that Aus and NZ could have insane house prices.  Still, if immigration is such a large driver there with all the free space they have, how much more is it here ?

[simvastatin]

They should have trailer parks, like in the good ole US of A

[PeanutButter]

1 hour ago, kzb said:

It's always seemed bizarre that Aus and NZ could have insane house prices.  Still, if immigration is such a large driver there with all the free space they have, how much more is it here ?

I’d guess that their very targeted immigration is half the issue. They aren’t after low paid grunt workers (unlike us), they want peak earners - the kind of people with experience and kids - who buy houses. 

The expanse of land is tricky, they have massive sprawling suburbs filled with bungalows and large gardens, but the jobs require commuting, and the public transport is mediocre to poor. Cue traffic jams (in the heat) and frustrated locals.

[PeanutButter]

1 hour ago, prozac said:

They should have trailer parks, like in the good ole US of A

They do but it’s mainly retirees.

[Meerkat]

No, it isn't, time to learn some economics? As always, symptoms and unintended consequences get confused with causes. 

[btd1981]

Bit racist..... ?

[PeanutButter]

17 minutes ago, Meerkat said:

No, it isn't, time to learn some economics? As always, symptoms and unintended consequences get confused with causes. 

Go on...

It’s only an opinion piece and I’ve posted it because this is a house price crash forum. Saying the piece is wrong would hold more water if you cited references showing that population increases are unlinked to house price rises. Please go ahead

[iamnumerate]

16 hours ago, kzb said:

It's always seemed bizarre that Aus and NZ could have insane house prices.  Still, if immigration is such a large driver there with all the free space they have, how much more is it here ?

It takes time to build lots of homes, also space in the center of Australia is not much use solving lack of housing in Sydney.  (Ditto with space in the Scottish highlands not helping lack of housing in London etc).

[Riedquat]

8 minutes ago, iamnumerate said:

It takes time to build lots of homes, also space in the center of Australia is not much use solving lack of housing in Sydney.  (Ditto with space in the Scottish highlands not helping lack of housing in London etc).

Of course you could plan on turning Fort William into another London if you plan long enough ahead, but anyone who doesn't see the downside to that needs their head examining - just because a greater population could theoretically be accommodated doesn't mean it's a good idea to increase it.

Australia has plenty of space of course but a very large proportion of it is fairly uninhabitable without massive resource requirements (just try getting enough water to it).

[darkmarket]

I'm still waiting on @Meerkat to enlighten the idiots with some expert economics.

[Meerkat]

8 hours ago, darkmarket said:

I'm still waiting on @Meerkat to enlighten the idiots with some expert economics.

I'm not saying that immigration has no effect. But it isn't an elephant, maybe an ant in itself if thought out properly. There are numerous far more important factors to start with. I will start with the most obvious and latest rigging of the market: HTB. Will you honestly disagree that this scheme is far less important than immigration? 

Otherwise, we could go on and on and on. Just the other month, was it on the Beeb or ITV, can't recall but caught a moment where a journalist interviewed campers of Middle Eastern or African origin as to why they so desperately want to reach the Blighty rather than stay at their point of arrival in the EU. (A hint - because this island is more pronounced welfare state than any other options on the continent. Need I suggest a natural solution that would in parallel cut housing costs, house prices to more natural levels? And also make many on the benefits go and fill quite a few of those roles immigrants are currently filling? Only folks who can sustain themselves would be allowed in or even willing to come. )

Honest money and banking would be the next level to take to, but part and parcel of abandoning the welfare state. 

Moaning about immigrants, may I also remind you, is actually one of the 10 Marx's socialism tenets. Actually worse, he suggested the state should go after them and  expropriate. 

 

[darkmarket]

1 minute ago, Meerkat said:

But it isn't an elephant, maybe an ant in itself if thought out properly. There are numerous far more important factors to start with. I will start with the most obvious and latest rigging of the market: HTB. Will you honestly disagree that this scheme is far less important than immigration? 

Yes, immigration at 300,000 / yr, and I suspect it might be much higher, would have a greater impact on the marginal buyer than the 20% or even 40% of credit coverage provided by HTB, especially as that could easily be replaced by another vehicle. It's another part of the infinitely available credit supply that's running out.

It's worth keeping in mind how important new entrants are for a pyramid scheme, supply in numbers is more difficult than credit, especially when transaction levels are so low.

6 minutes ago, Meerkat said:

Moaning about immigrants, may I also remind you, is actually one of the 10 Marx's socialism tenets. Actually worse, he suggested the state should go after them and  expropriate. 

Yes, that's insanity. But there's a difference between a sensible conversation and a topic that becomes taboo, and that's why immigration did become an elephant in the room.

I'd say credit was the bigger one, but nothing should be off limits for conversation.

[Wayward]

Good article that translates well to the UK.  Imagine if the immigrants that have arrived in the last ten years left....? Imagine the tsunami of available housing...prices would fall by over 50%.

I might say that the denial of reason leads to suffering...but this is no denial of reason, it is by design.

[Killian]

2 hours ago, Meerkat said:

I'm not saying that immigration has no effect. But it isn't an elephant, maybe an ant in itself if thought out properly. There are numerous far more important factors to start with. I will start with the most obvious and latest rigging of the market: HTB. Will you honestly disagree that this scheme is far less important than immigration? 

Otherwise, we could go on and on and on. Just the other month, was it on the Beeb or ITV, can't recall but caught a moment where a journalist interviewed campers of Middle Eastern or African origin as to why they so desperately want to reach the Blighty rather than stay at their point of arrival in the EU. (A hint - because this island is more pronounced welfare state than any other options on the continent. Need I suggest a natural solution that would in parallel cut housing costs, house prices to more natural levels? And also make many on the benefits go and fill quite a few of those roles immigrants are currently filling? Only folks who can sustain themselves would be allowed in or even willing to come. )

Honest money and banking would be the next level to take to, but part and parcel of abandoning the welfare state. 

Moaning about immigrants, may I also remind you, is actually one of the 10 Marx's socialism tenets. Actually worse, he suggested the state should go after them and  expropriate. 

 

I take it you've not had dealings with HTB purchasers or seen lists of their names/details? About 50% are immigrants. It is pretty shocking.

Without immigration the pyramid collapses and that is why any genuinely anti immigrant policies are so ferverently attacked

[Orsino]

Who benefits from sky high property prices? Immigrants? Hardly. They seem to be the ones actually building the limited new housing we have.

Follow the money. The beneficiaries are casino financiers who have turned property into asset-backed securities rather than people's homes. The beneficiaries are our land-owing rentier overlords, growing even richer on the rents of tenants and the investments of taxpayers.

The Spectator in Australia is owned by the Barclay Brothers. Resident in the Channel Islands for tax purposes. Estimated next worth in 2012 - £2.25bn. 

[TwoWolves]

17 minutes ago, Orsino said:

Who benefits from sky high property prices? Immigrants? Hardly. They seem to be the ones actually building the limited new housing we have.

Follow the money. The beneficiaries are casino financiers who have turned property into asset-backed securities rather than people's homes. The beneficiaries are our land-owing rentier overlords, growing even richer on the rents of tenants and the investments of taxpayers.

The Spectator in Australia is owned by the Barclay Brothers. Resident in the Channel Islands for tax purposes. Estimated next worth in 2012 - £2.25bn. 

 

Most immigrants are too poor to afford housing here so are provided for either by the councils or via quasi-governmental housing associations. Ultimately the tax-payers fund it all - our own penury. 

[BalancedBear]

1 hour ago, TwoWolves said:

 

Most immigrants are too poor to afford housing here so are provided for either by the councils or via quasi-governmental housing associations. Ultimately the tax-payers fund it all - our own penury. 

It does not matter who is paying, but if hosing is being used and money is changing hands for it, then it is helping to drive demand.

[BalancedBear]

4 hours ago, darkmarket said:

Yes, immigration at 300,000 / yr, and I suspect it might be much higher, would have a greater impact on the marginal buyer than the 20% or even 40% of credit coverage provided by HTB, especially as that could easily be replaced by another vehicle. It's another part of the infinitely available credit supply that's running out.

It's worth keeping in mind how important new entrants are for a pyramid scheme, supply in numbers is more difficult than credit, especially when transaction levels are so low.

Yes, that's insanity. But there's a difference between a sensible conversation and a topic that becomes taboo, and that's why immigration did become an elephant in the room.

I'd say credit was the bigger one, but nothing should be off limits for conversation.

Absolutely, and something which keeps being ignored. We have had around 300,000 people arriving here officially each year for over a decade, and large numbers since around the year 2000. We have probably had a population increase of 5 million plus since the year 2000. This equates to the equivalent of around 10 new cities the size of Bristol. This amounts to more people than the Republic of Ireland or Scotland. If we suddenly removed 5 million people from the housing market, I am quite sure it would have an impact on the price of housing. Therefore it must be a big factor.

[HovelinHove]

Great article, and as usual anyone whose mind has been brainwashed in a modern progressive “academic” institution will come out with the usual nonsense - such as immigrants don’t benefit. While there are many factors, including supply of credit, HTB etc, to deny that immigration has not had a significant impact on house prices in the UK is economic illiteracy. If 300,000 net new people are being added to the population each year through immigration this increases demand, even if they live ten to a house. Increased demand, with little increase in supply, results in increased prices. 

Brexit is the first step in putting things right, however, we will still have the same corrupt politicians in charge who are subservient to the corporate masters who love mass immigration. However, once we are out of the EU a future so called “populist” (i.e. representative) party will take power and do something about this issue which is the cause of many problems in our country.

[MonsieurCopperCrutch]

On 2/20/2019 at 5:28 PM, kzb said:

It's always seemed bizarre that Aus and NZ could have insane house prices.  Still, if immigration is such a large driver there with all the free space they have, how much more is it here ?

It only seems bizarre to people who have not travelled. Most of the country is uninhabitable. 

[Riedquat]

9 hours ago, BalancedBear said:

Absolutely, and something which keeps being ignored. We have had around 300,000 people arriving here officially each year for over a decade, and large numbers since around the year 2000. We have probably had a population increase of 5 million plus since the year 2000. This equates to the equivalent of around 10 new cities the size of Bristol. This amounts to more people than the Republic of Ireland or Scotland. If we suddenly removed 5 million people from the housing market, I am quite sure it would have an impact on the price of housing. Therefore it must be a big factor.

It certainly doesn't help in the slightest and I'm firmly against adding more people to the UK, strongly believing that it desperately needs less and that the number we've got has damaged it very badly.

However... If we hadn't stupidly added huge numbers of people the rate of housebuilding relative to whatever change in population we have had may well have been equivalent, so the supply - demand ratio would be no different (although we'd benefit from not having even more soulless developments, increased traffic, and slightly fewer large towns near other large towns near other large towns).

So yes, immigration bad but I'm not at all persuaded it's the main driver in HPI, that's still mostly down to loose credit.

[Captain Kirk]

On 20/02/2019 at 19:39, Meerkat said:

No, it isn't, time to learn some economics? As always, symptoms and unintended consequences get confused with causes. 

You don't need to look much further than the RBA and RBNZ. Wealthy foreigners may help inflate the bubble further but they are not the cause. In fact, it is the RBA and RBNZ that are the only ones that can stop the bubbles from deflating. I hope they don't succeed. The UK and US managed it by slashing rates 5%. That would take Oz and NZ well into negative territory.

[iamnumerate]

11 hours ago, Orsino said:

Who benefits from sky high property prices? Immigrants? Hardly. They seem to be the ones actually building the limited new housing we have.

Follow the money. The beneficiaries are casino financiers who have turned property into asset-backed securities rather than people's homes. The beneficiaries are our land-owing rentier overlords, growing even richer on the rents of tenants and the investments of taxpayers.

The Spectator in Australia is owned by the Barclay Brothers. Resident in the Channel Islands for tax purposes. Estimated next worth in 2012 - £2.25bn. 

I know some immigrants who came here because they got free housing because they are single parents - they certainly are gaining from the current system.

I agree with you that they are not the only beneficiaries but immigrants who get free housing do not benefit from the system.

(BTW saying immigration causes high house prices is not blaming immigrants, rather the politicians who let them without thinking if there is enough space.  If a boat in the third world sinks because there are too many passengers no one blames the passengers just the corrupt idiot who sold too many tickets).

[iamnumerate]

12 hours ago, Wayward said:

Good article that translates well to the UK.  Imagine if the immigrants that have arrived in the last ten years left....? Imagine the tsunami of available housing...prices would fall by over 50%.

I might say that the denial of reason leads to suffering...but this is no denial of reason, it is by design.

Good point.