Queenstown’s steady road to recovery

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Dwelling and section sales in the Wakatipu are all on the up, reports from a national agency show.

Two recent reports by Bayleys Research – a division of the countrywide real estate firm – say the residential market is on “a steady road to recovery”.

Bayleys notes an 11 per cent growth in annual dwelling sales, from 513 in the 12 months till May 2012 to 570 in the year till this May.

Residential section sales grew by 22 per cent from 120 in the 12 months till May 2012 to 146 in the year till this May.

The median dwelling price this May of $517,000 is 3.5 per cent higher than the $500,000 median in May last year.

“This lift in median prices is not unexpected given the sales volume increase and the fall in overall inventory levels,” Bayleys says.

For the wider Central Otago Lakes area, there was a 22 per cent decrease in listings from May last year till June this year.

The Bayleys report says this squeeze is evident in a halving of the time needed to sell a property – from 81 days in May, 2012, to just 42 this May.

The report says sufficient subdivisions are planned or in place to meet Queenstown’s growing population.

“But there is concern whether the section prices will allow for sufficient affordable housing.”

Many land and building packages start at just below $500,000, also the price for buying bare land and building an entry-level home, Bayleys says.

Turning to apartments, the fact so many are selling for prices at or below replacement cost will discourage new developments, Bayleys Research says.

An exception is a 17-unit central Queenstown development on Hallenstein Street, called 22 Hallenstein and co-developed by local Tim Medland – “it has achieved good pre-sales off the plans”, Bayleys says.

The report also notes some serviced apartment owners are pulling out of management pools to try to seek higher returns through alternative letting options.

Bayleys Research’s other Queenstown report notes a “slow but steady recovery” in commercial and industrial markets, adding prime CBD retail is in such strong demand that rental growth and key money are again a feature after the global financial crisis (GFC).

It predicts B-grade areas like Shotover and Camp Streets will shift to prime “through better quality retail being forced to accept these secondary locations”.

The report also suggests expansion of large format or bulk retail at Frankton Flats will have “a significant regional impact on retail shopping patterns, drawing consumers from a wider catchment”.

Another trend is the relocation of Gorge Road industrial premises to Frankton Flats.

Industrial land values plummeted post-GFC from $1000 per square metre to about $500 per sq m, but they’re now back up to $550-$600.

Despite limited vacant office space, there’s been no rental growth in the past year because there’s not been much demand – “this situation is not expected to change in the near future”.

Meanwhile, Bayleys has bolstered its Queenstown commercial and industrial sales ranks.

Marty Barwood is back after two years away from the business and long-time local Steven Kirk has joined from New Zealand Sotheby’s International Realty.