Strong demand and limited supply.

That’s a major reason why Queenstown’s residential values bucked the national trend and held up through the first half of 2023.

It’s the observation of local Colliers valuation director Heather Beard, commenting on Colliers’ 2023/24 ‘Otago Market Review & Outlook’, released today.

Demand, she says, is coming from migration to the region, partly driven by North Island weather events this year.

For many in Auckland and Hawke’s Bay, thinking about making a lifestyle move south, Cyclone Gabrielle and flooding ‘‘kind of just tipped them over the edge into making that decision’’.

In terms of supply, Beard notes ‘‘it’s really difficult to get a section, almost anywhere, even in the biggest subdivisions like Hanley’s Farm’’.

The report says first-home buyers appeared to return to the market in the first half of the year.

‘‘If they had pre-approval for finance, the opportunity was there where there weren’t a lot of buyers in the market — there was more priced stock, and I think that appeals more to that first-home buyer market.’’

Subsequently, ‘‘capital-rich’’ investors were re-entering the market based on the National Party’s promise to return interest deductability and revise the bright-line test.

National, of course, will be leading the next government, though, Beard notes, it’s promising to only gradually remove interest deductability, whereas the Act Party would do so immediately.

‘‘We’ll have to see how those coalition negotiations go to see what actually comes out of that.’’

The report notes interest rate rises are starting to bite.

‘‘Highly-mortgaged owners of investment property are most affected with a small number of mortgagee sales occurring.’’

Beard says some economists think rates have peaked while others think they could go higher.

Unfortunately, the report predicts rents will continue rising till a significant amount of housing stock comes to market.

In turn it’s restricting the ability of tourism and hospo businesses to find and retain staff, though some are now leasing or buying properties for their workers.

The report also says sections, if you can find them, are becoming attractive buying due to building costs stabilising and government regulations on interest deductability for new-builds.

It suggests the best news for the market is the ‘‘resurgence’’ of international tourism.

Hotel room rates were even exceeding 2019 levels, though revenue per available room is less due to higher operational costs.

The global increase in luxury travel was resulting in more higher-spending visitors, Beard noting we’re not seeing the mass tourism we had before due to cost-of-living pressures facing people in many other countries, too.

The report does note the likes of Airbnb operators who aren’t GST-registered will have to collect and return GST on rental income from January.

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