The buzz words for the Queenstown property market, according to an annual report launched on Friday, are “cyclical peak”.
Colliers International’s market review and outlook for Queenstown, Wanaka and Dunedin sets the local property clock at the “peak” of 12 o’clock.
Rather than the Doomsday Clock, in which midnight signals the threat of nuclear war, Colliers’ setting reflects what it calls an unprecedented real estate boom, on the back of increased visitor and population growth.
Colliers Queenstown valuation director John Scobie says 12 o’clock suggests there mightn’t be much more value growth in residential property.
“But I guess never say never, because we were probably six months ago thinking that these value levels were getting high, so who would have thought that at [entry-level] Shotover Country there’d be a couple of million-dollar sales?
“The big thing for us is there’s nothing on the horizon which suggests the market is going to decline.
“We see another maybe two years, possibly three, of levelling off at the same value levels.”
The report says this is mostly due to Queenstown’s ongoing tourism growth, infrastructure development, economic growth and construction activity.
It estimates that by the end of this year there’ll be more than $546 million worth of construction underway – comprising $60m in infrastructure work, $186m in commercial projects and about $300m in house building.
“Increased cost of funding – and reduced availability of it, combined with higher interest rates – are the only possible negative factors we can foresee emerging amid the very positive medium-term outlook,” the report says.
It acknowledges, however, that “this success comes at a price” in the form of Queenstown’s housing crisis – affecting both would-be first-home buyers and renters.
It predicts “no end in sight” to the rental housing crisis, and says this could have a flow-on effect for employers.
The report also says visitor accommodation is at a premium despite the number of home owners putting rooms on Airbnb and two small new hotels being under construction.
It acknowledges a 227-room Holiday Inn Express is mooted, “but with an estimated additional 300 new rooms needed every year to meet projected growing demand, the current response is well short of market demand”.
In its projections, the report says the increasing cost of accommodation – hotel tariffs lifted 15 per cent over the year to March 2017 – presents “a major risk to the town’s reputation among visitors”.
As a result, visitors would stay for shorter periods, with some tour groups opting to stay in nearby, less expensive towns, and visiting Queenstown on day trips only.
“The tourism boom has cast the spotlight on the major deficiencies of Queenstown’s infrastructure,” Scobie says.
“While central and local government investment into infrastructure has increased, there is a critical balance that needs to be addressed.
“We want to attract more tourists and residents, but making sure our infrastructure, accessibility and housing market can cope with this unprecedented growth is a key priority.
“Creating additional residential supply may not necessarily be the answer.”