History shows Queenstown should be bracing for an economic slump but valuation experts say “unprecedented” tourist numbers are keeping property prices at a peak.
Colliers International releases its 2018-19 local property market review today.
It shows the market has reached a cyclical peak – but the tourism boom is keeping it there. And there are no signs of prices dropping off any time soon.
Colliers expects property values in Queenstown to remain at high levels in the short term.
It does, however, warn some affordable newer subdivisions are at risk of “price correction”.
Colliers Queenstown valuation boss John Scobie says that’s referring to places like Shotover Country.
Home owners shouldn’t worry their house values are about to bottom out though, he says.
While economic downturns have tended to happen about every 10 years – and we’re due for one now – signs are still positive.
“People think we’re overpriced and there’s a fall coming, but there seems to be no signs there that something’s going to break.
“There’s nothing suggesting it’s going to drop off rapidly.”
A significant increase in building costs over the past year, and high land costs, is prompting some buyers to seek turn-key deals, or look at existing housing stock, he says.
There is, however, a shred of hope for renters struggling to afford the resort’s hefty prices.
Rental prices may stagnate due to an oversupply in some areas, the report states, with people moving out of town for cheaper places.
But Scobie says prices won’t drop significantly: “I’m not saying they’re going to fall off a cliff.”
Visitor accommodation is at a premium, with occupancy rates averaging 71.2 per cent over the past year.
New hotel development is underway, with potentially 2405 rooms in the early construction or planning stages, according to the report. It will take time to bring them to market, though.
“This means new rooms are more likely to come in stages, rather than flooding the market.”
Meanwhile, about 14 per cent of the resort’s housing stock is being used for Airbnbs.
“Theoretically” Queenstown council’s push to restrict Airbnbs could boost rental availability – but policing it would be the key, Scobie says.
The government’s proposed Overseas Investment Amendment Bill did spark “a bit of a rush” of foreign investors buying property, but Scobie’s unsure if that’s still the case.
According to the report, the bill could restrict the flow of capital into the region if it comes into law.
Scobie says that may not result in Queenstown housing becoming more affordable.
“There is a risk the proposal will instead restrict the flow of capital into important developments for the area, including residential apartments, and in turn has the potential to negatively impact the construction industry.”