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Medium to Long-Term Outlook Positive for Queenstown Property Market
16 March 2010
Chris Stanley, TelferYoung Canterbury, reports the Queenstown property market is stabilising after sharp falls from the median sales price highs of autumn 2008.
Overview
The Queenstown market has historically been quite volatile with rather rapid property cycles when compared to the other metropolitan areas of New Zealand such as Auckland, Wellington and Christchurch.
Queenstown is New Zealand's premier domestic and international destination and is therefore more susceptible to major economic changes both within the New Zealand economy and internationally.
There has been a significant amount of building construction undertaken in Queenstown over the last six years covering all sectors of the market including:
- Residential
- Apartments
- Retail and office
There has also been a considerable amount of capital invested in:
- Land Development
- Infrastructure
The fallout from the global financial crisis has impacted on Queenstown with a significant change in the supply and demand equilibrium. The availability of credit has impacted not only on the financing of existing property but also on new development and refinancing partially completed projects.
The Residential Market
Residential sales volumes peaked in mid 2007 with a substantial reduction over the last two years. The median sale price peaked in autumn 2008 falling through until late 2009 at which time the market appeared to be stabilising and showing some improvement.
There appears to be good demand for lower priced property suitable for first home owners however the market for higher valued properties, excluding premium property, is subdued.
There has been an increase in mortgagee sales.
Vacant residential sections have been more heavily impacted by changing market conditions with a substantial fall in section values and a significant reduction in sales volumes.
The Apartment Market
The apartment market has also gone through a price correction as well as a significant reduction in sales volumes. This sector of the market has also been significantly impacted by mortgagee sales.
The supply side of the market will be further impacted by developments currently under construction being completed and entering the market.
The Commercial Market
The commercial market has been very subdued during 2009 with very few sales occurring with investment yields required by investors increasing from the more buoyant times in 2007.
There has been a substantial increase in development in the centre of Queenstown over the last two years creating a significant increase in supply of retail and office accommodation.
Office rentals have fallen as a reflection of the increased supply and limited demand. There has also been some softening of retail rental levels.
The Industrial Market
There is a limited supply of industrial land in the general Queenstown area with the bulk provided in Frankton. The Glenda Drive industrial area now is almost fully developed.
The industrial land supply will increase following development of the industrial/business subdivision by Shotover Park Limited as well as land associated with Five Mile.
There is still strong investor demand for good quality property however investment yields have eased from the levels achieved at the market peak in early 2007.
Major Developments
Remarkables Park is located adjacent to the airport. It currently provides a modern retail and office complex together with a large area of development land. It is planned to extend the retail area as well as develop a retirement village and residential housing.
Kawarau Falls Station is under construction with Stage 1 planned for completion late in 2010. It is located on a 6.5 hectare site overlooking Lake Wakatipu.
It was originally planned to provide 3 international hotels together with conference centre, apartments, townhouses and worker accommodation.
Stage 1 will provide 2 hotels and townhouse/apartments. The development of Stage 2 remains uncertain following the receivership of the development company.
Jacks Point is a large residential subdivision on a site of approximately 1250 hectares. It is planned to provide over 1400 dwellings and a similar number of apartments. The golf course and support infrastructure having been completed together with Stage 1 subdivision and the construction of many new homes.
Five Mile is located adjacent to airport and the main highway. It comprises 2 blocks with Stage 1 comprising the smaller of the two with an area of approximately 7.8 hectares and Stage 2 a larger landholding of approximately 23.3 hectares.
Development was to be based on the "New Urban" model being co-ordinated mixed use including large format retail, speciality shops, light industry, offices, educational facilities, apartments and housing.
Stage 1 includes the large excavation for a basement carparks. This property has now sold with part to be developed as a Countdown Supermarket. Stage 2 is available for purchase.
Summary
The Queenstown property market is very dynamic when compared to the main metropolitan areas of New Zealand. It does tend to suffer "boom-bust" cycles however does react quickly to changes in both the domestic and global economies.
The market is currently suffering from an over supply situation in almost all property sectors but particularly for apartment, tourist accommodation and office space.
The medium to longer term outlook for Queenstown is positive being New Zealand's number one tourist destination with a high international profile.
For more information contact:
Chris Stanley
Mob: 0272933279
This monthly paper reflects the views of the writer and may not represent the views of all TelferYoung staff.