Resort fast becoming winter favourite for Aussies
The so-called “Macquarie millionaires” could prop up Queenstown’s “ground zero” real estate market, says a prominent New Zealand finance commentator.
Economic and housing expert Bernard Hickey, in Queenstown for a conference last week, predicts it could be at least five years before local property booms again – and then not to the level of recent years.
But the resort won’t suffer as badly as we could have “because the Australians are coming”, he suggests.
And particularly the Macquarie millionaires – well-heeled Sydney investment bankers working for Macquarie Group.
“They would love to own an apartment in Queenstown and come and visit during the winter.
“I think Queenstown is increasingly becoming Australia’s favourite winter resort.”
Hickey ticks off the reasons – three-hour flights, airline connections getting better and cheaper, and Australia’s lack of real alpine resorts with reliable snow.
“I’m sure Australian demand for an alpine resort will be a saviour for Queenstown in the long run,” Hickey says.
NZ, and Queenstown, are fortunate to be neighbours of a country that’s weathered the global economic storm better than any other, he adds.
Hickeys says he’s followed Queenstown’s fortunes closely because the resort saw “the biggest flash, the biggest mushroom cloud” in the country’s property boom during the last five years, which was unprecedented and probably unrepeatable.
“Queenstown has been ground zero for the collapse of the residential property development sector in NZ, not just the developers but the financiers.
You can track back the failure of Hanover Finance and Strategic Finance, to an extent, and Dominion Finance, to what was going on here.
“A lot of these big hotel/apartment developments round Queenstown have been the final straw that broke the finance companies’ backs.”
Finance companies counted on prices continuing to rise as they lent to developers.
“The big projects are going to struggle because their financial model often depends on property investors who believe they’re going to buy something then flick it on quick to some end-buyer.”
The “merry-go-round” has stopped as developers fail to get finance for “the more speculative big-ticket deals”.
Queenstown’s problem is that its property market, more than most, relies on international investment – especially for resort-style developments.
“That audience of people who are cashed-up, very wealthy international property investors/playgirls and playboys are pulling their heads in big-time because of the credit crunch, particularly in the United States and Europe.
“There is going to be a drag on Queenstown real estate that perhaps is even tougher than some other parts of NZ.”
On the other hand, Hickey suggests, there’ll continue to be good demand for stand-alone homes “because it’s a fantastic place to live and the lifestyle’s great”.
“And if you’re retiring and you’ve got a bit of money to spare, everyone wants to do what Michael Hill did.”
However, Hickey warns anyone investing in property takes a risk if they assume that tax breaks will continue.
“The Government is considering creating a level playing field with other types of investments, so you could potentially see the imposition of a capital gains tax or a land tax – or changes to the way LAQCs (loss attributing qualifying companies) and family trusts are taxed, which would mean that property may not have the same advantages in 10 years that it has now.”