Migration to New Zealand is weakening, and will reduce support for the housing market in the next 18 months, along with rising interest rates and Budget tax changes, according to an economist.

The net gain in migration of just 800 in April was the lowest monthly figure since the end of 2008, according to official figures. There was a drop in both the number of people arriving and leaving permanently.

In the year to April the total net gain was just under 20,000 people, down from a recent peak of 22,600 in the year to January, Statistics New Zealand said. The 20,000 gain adds just under 0.5 per cent to the population.

Migration is expected to weaken further as more people leave for better job prospects in a stronger Australian economy, even though New Zealand's economy is also improving and unemployment is dropping.

Deutsche Bank chief economist Darren Gibbs said outflows to Australia were expected to rise this year, though the Budget tax cuts would help to stem some of that flow.

In the year to April, about 30,000 people left for Australia – about 15,000 fewer than the year to April 2009. The net loss to Australia in the past year was about 15,000 people – less than half the level of the previous year.

While migration numbers were falling, the overall net gain was still supporting the economy, along with tourism, low interest rates, strong commodity prices and trading partner growth, Mr Gibbs said.

ASB Bank economist Jane Turner said the weaker trend in migration would "reduce support" for the housing market as it faced headwinds from rising interest rates. The Reserve Bank is expected to start lifting official interest rates next month.

As well, the Budget change on property depreciation would also lower demand for housing "at the margin", she said.

The impact of those factors was expected to be relatively muted, "with house prices probably giving back some of the gains made during the spring recovery".

However, Westpac Bank said the tax changes were a "clear negative" for house price growth. Property ownership was an income tax shelter for both owner-occupiers and landlords. So if the rate of income tax fell, the tax-shelter value of property waned and the capital value of property would fall.

But rather than predicting a drop, houses prices would stay flatter for longer than previously expected, Westpac said.

Statistics New Zealand said the seasonally adjusted 800 net gain in migration in April was the lowest increase since December 2008, when the net gain was 500.

On an unadjusted basis, there were 700 fewer arrivals and 300 more departures of non-New Zealand citizens than in April 2009. The net outflow of New Zealand citizens for the year to April was the lowest for an April year since 1995.

Coming And Going

• Net migration weakened in April, but the annual gain remains stronger than average in the past decade.
• Monthly: Net migration 800 (April seasonally adjusted)
• Average last year: 1900 a month.
• Yearly: Net migration: 20,000 (year to April); 22,600 (year to January).
• Average for past decade: 11,900.
• Departures in year to April: 63,700 (down 20 per cent from year to April 2009).
• Arrivals in year to April: 83,600 (down 6 per cent from year to April 2009).

(Source Dominion Post)