It’s mostly downhill


2008 was Queenstown property market’s annus horribilis.

Queenstown was to be New Zealand’s property barometer for 2008, according to financial prophet Chris Lee – so how did his prediction fare in hindsight?

Whether things went “very right” or “very wrong” in the Wakatipu would affect business and investor confidence nationally, Lee said boldly last January – and there was plenty of evidence of the latter.

The worldwide credit crunch and declining visitor numbers followed local property downward.

The starkest example, of course, is “Hendo’s Hole” – the stalled $2 billion Five Mile township by Queenstown Airport planned by colourful Christchurch developer Dave Henderson.

Five Mile was put into receivership by Hanover Finance just before the finance house froze investors’ funds – receivers said in September that Five Mile Holdings owed $79.2 million.

Hanover’s problems were also compounded by the $2b Jacks Point golf resort despite Jacks Point co-developer John Darby stressing his company had no loans or exposure to the troubled finance company.

Hanover’s recent rescue package partly depends on the finance company selling about 200 Jacks Point sections in a very slow market – sites that Hanover owners Eric Watson and Mark Hotchin had bought off Darby in rosier times.

The boss of Fletcher Building, which has also struggled to sell its Jacks Point homes, told a Sunday paper in September: “You don’t have to be an Einstein to realise property sales in Queenstown have hit the wall.”

Developers crashing or stumbling has been a recurring theme in the Wakatipu this year:

  • Just this month, companies associated with two major Queenstown developers, Rod Nielsen and John Leeder, were placed in receivership.
  • As apartment king Ross Wensley was finishing off Marina Baches, the company behind another of his Frankton Road projects, The Club, went into liquidation.
  • Pinpoint Trustees, the McEwan Group company behind Queenstown’s planned Hilton Hotel, was also placed in liquidation and the Sunday Star-Times reported a dispute between developer Dan McEwan and owners of his latest clutch of Pounamu apartments.
  • Further strife hit the commercial areas of the five-star Sofitel hotel, which are now under mortgagee sale.
    But the property slump’s affected not just several high-profile developers.

Probably worst off is the over-supplied, over-sold apartment market, where asking prices have come back at least 30 per cent.

Sales volumes of residential properties in the Wakatipu also dropped about 40 per cent this year, with desperate vendors often having to take huge price hits.

Yet despite all the gloom, local real estate principals – who of course are optimistic in even the worst of times – believe Queenstown could lead NZ out of the slump, helped by drastic falls in both the dollar and interest rates.

Also pumping up the resort’s confidence is the fact that work on the $2b Kawarau Falls Station remains on track – with the first stage of five buildings alone providing another full year of construction work.

Eight major commercial projects are also in train, representing $200m of development, including land cost.

Established players like Millbrook Resort, Remarkables Park, David Broomfield’s Woodlot Properties and Wayne Foley’s Commonage Villas also continue to develop despite the recession.

Their theory is that in tough times, quality will still win through.

Perhaps a sign of that is the record $6.5m paid for a Queenstown Hill mansion just two months ago.