- Auckland land use policies restricting both densification and expansion on the fringes make Auckland house prices highly subject to migration pressure. If you run a vertical supply curve, any shift in demand translates into moves up and down that curve.
- Migrants will go to the place that best suits them; that will depend on things like having an established community from their home country and on their likely wages in the different places.
- Many rural regions would really really like to have more migrants; it's easier to fund existing infrastructure if population isn't declining.
- Migrants prefer to go to Auckland and so current immigration policy is hitting on 1; that will continue until housing costs are so high that migrants are indifferent between moving to Auckland and moving elsewhere. This means that productivity differences between Auckland and the regions are capitalised into house prices.
The Immigration Minister's contemplating adding more extra points for those migrants willing to live outside of Auckland. This puts less pressure on Auckland housing prices, but does mean that migrants are forced to go to places were they would be less productive than they otherwise could be - or where they're worse off as they view things for want of Auckland-specific amenities.
Best would be to fix Auckland land use policy so that more people could live there. Without that, we're in second-best worlds where the alternative to "migrants have to go to not-Auckland" could well be "well, then, we won't let so many migrants in."
While we're in this second-best world, I wonder whether there could be option for Councils to say how many points they'd like to award for migrants willing to come to their regions. The "Not Auckland" space is pretty heterogenous.
