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Feeling the market pulse: Colliers valuers Heather Beard and Barry Murphy

By PHILIP CHANDLER

Queenstown’s property market’s defied predictions of a Covid-caused downturn this year with values increasing in most sectors.

That’s a finding from property services company Colliers’ ‘Otago Market Review and Outlook 2021/22’, released yesterday.

In the residential market, particularly, demand continues to outweigh supply, with sales prices hitting record highs.

‘‘This is in part due to new residents moving to the regions, including expats returning home,’’ local Colliers valuation director Heather Beard says.

‘‘For some, lockdowns brought to light the importance of living in a place with opportunities for outdoor experiences and lifestyle options and, along with the increasing acceptance of remote working, this has made the Queenstown-Lakes district appealing.’’

In the new higher-density Hanley’s Farm subdivision, for example, last year’s median price of $960,000 has risen 27% to $1,220,000.

Value appreciation’s also been driven by listings being at their lowest for 14 years.

Local Colliers valuer Barry Murphy says listings are usually low in winter, but adds: ‘‘If you sell in this market, you’re selling at a high price but you’re also having to buy in the market where demand is huge.’’

The report says a two-tier market’s emerging with investors targeting new stock — partly because it’s exempt from the new rules around deductibility in interest — rather than existing stock.

‘‘Older-style units in established suburbs including Fernhill and Frankton are seeing interest from the first-home buyer market.’’

Those buyers can live in them while they do them up to meet healthy-homes regulations.

The report also notes the growth in townhouses, apartments and terraced homes.

And it says the rental market’s rebounded from last year’s post-lockdown fall of about 20% — for Queenstown Lakes, median weekly rent for the six months to February last year was $640, then dropped to $515 for the next six months, however for the six months ending this August it was up to $545.

Beard notes interest rate rises, just coming through, are considered a risk for ‘‘highly-leveraged mortgage-holders’’.

However that’s less likely to affect the higher end, where lifestyle sections and dwellings have roughly doubled in value over the past five years, the report says.

This year there’ve been 40 dwelling sales above $3 million, four of them $10m-plus, compared to 23 last year.

In the commercial sector, the report notes there’ve been strong transactions ‘‘for centrally-located assets’’, but some vacancies in secondary/fringe areas where rentals dropped last year and still haven’t rebounded.

Beard says: ‘‘Ongoing border closures, CBD roadworks and parking issues have seen some tenants end their tenure in the CBD, with some choosing to move to Frankton.’’

The report also notes the ongoing threat of lockdowns will impact business viability, ‘‘which could have negative ramifications for the commercial property market’’.

Perhaps surprisingly, demand’s remained strong for tourism property, ‘‘again with a focus on central CBD positions’’.

Notable sales this year included Deco Backpackers selling for $8.3m and, also on Man Street, Lomond Lodge motel selling for $5.2m.

Rentals in Frankton’s industrial area, the report says, have recovered after ‘‘a short, sharp decrease following the 2020 lockdown’’.

What it calls ‘‘a precedent-setting sale’’ occurred there in February, when the then-unfinished Bunnings Warehouse sold to a private investor for $33.5m with a ‘net contract yield’ of 3.87%.

That was the strongest yield paid for a Bunnings investment sale in Australasia.

scoop@scene.co.nz