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The pick-up in population growth continues to fuel demand for housing, just as it has done for the past six months, ASB economist Jane Turner says.
As departures remained low, the supply of housing available for sale had remained below average, creating very tight conditions in the housing market.
"Combined with low interest rates and a recovery in confidence, house prices have started to pick up substantially over the past few months."
The demand for housing and the increase in house prices threatened a return to an economy that was overly-leveraged to housing debt.
That would test the Reserve Bank's patience over the next six months, she said.
The Reserve Bank remained adamant it would hold the official cash rate at current levels until the second half of 2010 but Ms Turner expected housing market pressures would prompt earlier action.
She expected the first increase in April 2010.
Statistics New Zealand figures released yesterday showed the annual net migration gain reached its highest figure in five years, as the global financial crisis caused a fall off in the number of people leaving.
The net migration gain reached 18,600 for the year to October, the highest annual figure since August 2004.
The 86,700 permanent and long-term (PLT) arrivals last month was down just 700 or 1% from a year earlier, while the 68,100 PLT departures was down 14,900 or 18%.
For the month of October, PLT arrivals exceeded departures by 3000, compared with 1500 a year earlier.
The number of monthly PLT departures fell by 2000 or 35%, including 1800 fewer departures to Australia, and 200 fewer departures to Britain, Statistics NZ said.
Monthly PLT departure numbers have been at least 1000 lower than the same month of the previous year since February.
Seasonally adjusted, PLT arrivals exceeded departures by 2100 in October, up from 1900 in September, and similar to levels seen since February.
A net inflow of 1300 migrants came from Britain in October, with 400 from India and 300 from China.
The net outflow of 800 migrants to Australia was the lowest outflow to that country for an October month since 2002.
It was down from outflows of 2700 in October 2008 and 2000 in October 2007.
Ms Turner said departures to Australia and the United Kingdom remained weak after falling considerably during the last nine months.
The global recession had seen unemployment rise in most economies and had put a dampener in permanent and long-term departures in Europe (excluding the UK) and the United States.
However, the fall was likely to be only temporary.
"With the Australian economy avoiding recession and starting to benefit from the pick-up in hard commodity prices, employment growth in Australia is likely to recover over the next year.
"Given New Zealand's relatively weak economy, relocating to Australia will look increasingly attractive to New Zealanders once again."