Under the hammer

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The ghost of bankrupt apartment developer Dan McEwan returns to haunt Queenstown’s real estate market next month. 

Bayleys Queenstown has instructions from McEwan Group receivers to put another 10 properties on the auction block in the latter half of August. 

Six units are in the Pounamu Prime stage of a large apartment complex which McEwan developed on Frankton Road to anchor a now-aborted Hilton Hotel. 

The other four are in the lesser-known Bowen View complex on Queenstown Hill’s Edgar Street, Bayleys owner David Murray says. 

Most are two-bedroom apartments. 

Bayleys earlier sold 13 Pounamu Prime and Bowen units in April during an auction that Murray calls “phenomenal”. 

Prices ranged from $296,000 to $500,000 at yields of five per cent, he adds. 

Those figures were about half the original sale prices and below replacement cost of building, Murray says. 

These are “non-managed” apartments, which are popular with Australians, he adds. Aussies featured strongly in the April auctions, comprising about a third of the 35 bidders. 

The distinction between “managed” and “non-managed” units is important, Colliers International apartment specialist John Scobie says. 

Non-managed units such as those at the upcoming auction are identified as good value and selling below replacement cost, he says. 

“But not so [with] managed apartments where you’re locked into management agreements – some management agreements are more geared to managers than owners,” Scobie adds. 

Managed apartments have dropped in price by 40-60 per cent in the past two years, while non-manged apartments have not dropped as much as that, he says. 

Murray admits the non-managed Pounamu Prime and Bowen View have halved in that time. 

While Scobie isn’t saying the market may not fall further, apartment prices have now dropped below replacement cost. 

“That’s got to be good buying.” 

The Government’s recent Budget has slowed things down, the Colliers man says. 

“It’s pulled values back a wee bit as [investors aren’t] getting the benefit of offsetting depreciation against income.” 

Many managed apartments were being discounted but nightly rates will rise if tourism growth continues. 

A glut of unsold apartments remains locally so it’s unlikely there will be any fresh developments on the horizon for a while, Scobie says. 

“You’d be pretty bold to build any apartments in the next two or three years.”