The Reserve Bank of New Zealand released research showing that when immigration numbers are high, house prices and household borrowing both go up. The finding confirms what many people have suspected — and gives numbers to back it up.

The paper, 'Migration and the New Zealand economy', looked at how migration flows through the economy. When a large number of people arrive, they need housing, they compete with existing residents for homes, and more houses get bought. The bank's research shows this pattern clearly: a migration inflow equal to 1 percent of the population lifts house prices by roughly 10 percent.

That matters in real money. Average house prices in New Zealand were $934,806 in March 2024. A 10 percent jump is about $93,500 — a chunk of money that makes it harder for first-home buyers to get on the property ladder.

What the Reserve Bank does about it

The Reserve Bank has tools it can use to slow this kind of runaway borrowing. In 2013, it introduced rules requiring people to put down larger deposits before getting a mortgage — if you borrow money to buy a house, you have to save more of your own money first. The Reserve Bank's analysis showed that this rule slowed house price rises and kept households from borrowing as much as they otherwise would have.

The new research raises a question for the Reserve Bank: if immigration is continuously pushing up prices, how should these rules be set in the years ahead? The tricky part is that migration numbers change quickly and can shift a lot depending on government policy.

The broader picture is that New Zealand currently has more people arriving than usual. Immigration policy, housing supply, and the Reserve Bank's borrowing rules are all being adjusted at once. The bank's research helps show how these pieces fit together.

The Reserve Bank doesn't decide immigration policy — that's up to Ministers and Parliament. But the bank's job is to spot risks to the financial system and flag them. A sharp jump in house prices and household debt, driven by large migration inflows, is exactly the kind of risk the central bank watches for. This research gives Parliament and policymakers clearer numbers to work with when making decisions about immigration and housing.

The full paper is on the Reserve Bank's website. As with all discussion papers, it notes that the views are those of the authors and may not reflect the official position of the Reserve Bank.