Theresa May yesterday claimed house prices could be “10 per cent lower over a 20-year period” if net migration was cut to zero – however, the migration advisory committee’s “Analysis of the impacts of migration” report (pdf) from earlier this year suggests the impact is likely to be lower.
The MAC concluded (page 81):
…the impact of non-EEA economic migration on the demand for, and thus cost of, housing in the UK is lower than the impact of an increase in the UK-born population of similar magnitude.
The report draws on LSE research commissioned by the MAC, “The impact of migration on access to housing and the housing market” (pdf).
The study mainly looked at the housing market effects of Tiers 1 and 2 migrants, which, ther report points out, within the overall context of migration represents “a small minority” – most migrants are from other EU countries (whose inward migration to the UK the government cannot cap), a group that “will have a very much stronger impact on housing markets than do Tiers 1 and 2 migrants”.
On the impact on prices, it notes (page 36):
The Reading Affordability Model (Meen et al, 2011) allows some guesstimate of the impact of Tiers 1 and 2 migration on house prices overall and suggests it would add less (probably considerably less) than 1% to prices. This increase in demand will produce some new supply but, given the very low measured price elasticities of housing supply and the slowness of response, it is likely to be in the low thousands of dwellings.
The overall outcome is therefore likely to be a limited impact on rents and rather less of an effect on prices – but resulting more in some increase in housing pressure rather than significant supply response.
Concluding (page 44):
The demand from Tier 1 and 2 households is clearly very small as compared to the demand from general household formation, which runs at between 275,000 and 290,000 per annum in the UK overall.
In addition, because of lower propensities to form household and their greater propensity to live in the private rented sector where densities are higher their impact on demand is initially disproportionately low. Over time those who remain will increase their demands in line with indigenous households with similar attributes.
So a particularly important issue for the housing market is what proportion of migrants stay in the country into the longer term. Our estimates are based on comparable groups in the past. However, future behaviour may well be very different.
In sum, the vast majority of inward migration is from within the EU (i.e. cannot be restricted); the impact on prices of poorer non-EEA migrants (the vast majority of whom will initially reside in the private rented sector) is minimal; and the impact of skilled Tier 1 and Tier 2 non-EEA migrants will add less than one per cent to house prices over the next five years – or well under four per cent in the next 20 years.