This year marks the turning point in Queenstown’s property cycle, according to a new industry report.
Released tomorrow, Colliers International’s 2012 Queenstown Property Market Report sees plenty of positive signs despite economic setbacks in the past year, such as the Christchurch earthquakes.
According to the Colliers investor confidence survey, Queenstown is now one of the most positive property markets in New Zealand.
In 2009, 43 per cent of respondents to the survey thought the local market would deteriorate – now 26 per cent expect it to improve.
The report also notes heightened activity at both ends of the residential market’s pricing spectrum.
“A rise in overseas interest has fuelled increases in the upper-end dwellings and prime sites, near to values seen at the peak of the market,” Colliers states.
Sections are selling at Wyuna Preserve near Glenorchy for $950,000 to $2.7 million, according to the report.
“The cost of homes being developed is significant with construction budgets of $5m-$10m in some cases.”
Colliers also notes the lowest price segment – below $525,000 – is the most active, commanding 38 per cent of all residential sales over the past year.
Local Colliers consultant John Scobie says three factors are stimulating entry-level home-buying.
“A lot of people are coming off three years of KiwiSaver and have got their deposit together.
“Banks are now funding 95 per cent mortgages, in some cases higher, and interest rates are still low – you can fix for four years at just under six per cent so you’ve got certainty.”
The new report states: “As market confidence improves this year we expect to see a flow-on into increasing residential sales volumes and eventually some upward pressure on values in some sectors.”
However, building consents, in line with national trends, have been low, the report says.
Last year there were 191 dwelling consents in the Wakatipu, compared with a 20-year average of 290.
“Given existing trends we would expect some pick-up in dwelling consents in the near future,” Colliers predicts.
The Queenstown CBD commercial market also remains strong with good yields.
“Rental growth is being driven by demand from national and international retailers wishing to have a presence in Queenstown, which is having the adverse impact of putting pressure on the viability of privately-owned local-based retail businesses.”
Colliers predicts imminent future commercial development around Frankton’s Remarkables Park Town Centre, and the first stage of the Five Mile retail complex will also get going.
However, further Frankton Flats development on 60 hectares of land hinges on the outcome of a major district plan change in the pipeline.
“The outcome of this process will define a significant amount of Queenstown’s future commercial and industrial land supply,” Colliers believes.
The report also picks up on renewed interest in managed apartments, particularly from Australians who appear to have waited for prices to fall.
However, “it would be unreasonable to expect capital growth [in apartments] over the short to medium term”, Colliers warns.
Purchasers are only now fully understanding the detrimental effects which some management agreements have on the value of their apartments, the report states.