Don’t bank on resort

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Lenders are running scared of Queenstown, financial commentator Bernard Hickey claims. 

Crashes like Kawarau Falls Station and Five Mile taint the resort so “the word ‘Queenstown’ now sets off alarm bells” with money-men, Hickey says. 

“Banks and finance companies are nursing losses of close to a billion dollars on [Wakatipu] property.” 

Hickey, in Queenstown last week hosting a post-Budget seminar, predicts the stigma from the losses will stifle local property by dampening demand from absentee owners for holiday or investment units. 

“With capital gains gone, at least for a few years – and I actually think for the next 10-20 years – there’s no reason to buy.” 

One Hickey statistic is telling. 

When property really flew, say in 2007, residential real estate turnover nationwide was $3 billion monthly – it’s now $1b-$2b. 

Hardest hit is “speculative froth” like Queenstown apartments and villas sold to investors, he says. 

“The people who thought, ‘Hey, we’re going to fill this [unit] with rich Aussies most of the year and make a killing and we’ll make some money on the capital gain’,” Hickey says. 

Real Estate Institute Queens-town spokesperson Adrian Snow writes Hickey off as “extreme”. 

“Actual market behaviour is likely to be much more moderate. Bernard is getting ordinary mum and dad buyers confused with developers.” 

Yet some of financial fortune-teller Hickey’s comments “strike a chord” with Queenstown Chamber of Commerce president Alastair Porter. 

“I think there’s a lot of truth in what [Hickey] says – I’ve made similar comments myself.” 

But any stigma from flops like Five Mile and Kawarau Falls is “grossly unfair”, Porter says. 

“Those projects failed not because of anything to do with the Queenstown property market. 

“They failed because they were inappropriate developments that were never going to be viable, regardless of the recession. 

“Financiers who lost money on them have only themselves to blame.” 

He parts company with Hickey about local property being flat for years. 

“Capital gain will be a little slower than in the past – but [long-term] the dips are always exceeded by future highs.” 

It’s “classic economics” – our topography makes development land scarce yet Queenstown’s reputation is growing worldwide, Porter says. 

“Fixed supply, growing demand – in those circumstances, you’re always going to get growing capital value.”