The housing market recovery is likely to be underpinned by a turn-around in net migration from the second half of this year and into next.
The Department of Labour is predicting annual net migration will go from a net inflow of just below 4,000 people in the year ended June last year to an outflow of about 4,000 in the near term before turning back to a net inflow of about 6,000 in mid to late 2012 and early 2013.
Its research "shows that permanent and long-term migration to and from New Zealand has followed a cyclical pattern over the past 60 years and current patterns are consistent with the long-term trends," Labour and Immigration Research Centre general manager VasanthaKrishnan says.
"Recent trends show we are at a low point in the permanent and long-term migration cycle."
The department's predictions are broadly consistent with those of other economists.
Deutsche Bank's Darren Gibbs says there's an argument about timing and he expects the turnaround in net migration is more likely to happen next year.
"The pull factors out of Australia are still pretty strong and our economy's going to be pretty weak for most of this year."
Net migration of 6,000, assuming an average family size of three, means about 2,000 homes in the context of annual housing sales in a reasonable year of between 80,000 and 90,000, Gibbs says.
BNZ economist Doug Steel says an annual migration inflow of 6,000 is still quite low in the context of a recovering economy and the relatively low 6.6% unemployment rate.
"We suspect the labour market could become quite a key constraint on growth. It could start generating some underlying inflation and therefore a response from the Reserve Bank."
Thus although a turnaround may see migration go from being a headwind to a tailwind for the housing market, it may also lead to higher mortgage rates, he says.
Robin Clements at UBS New Zealand says although building consents have been trending higher, they're still not enough to cope with population growth.