By PHILIP CHANDLER
A long-time Queenstown realtor believes the local property market will ride out the Covid-19 pandemic relatively unscathed.
Harcourts Queenstown principal Kelvin Collins says his confidence is based on the fundamentals of the market being sounder than during earlier crises.
“The market has been a lot more responsible this time around, and it’s been a steady growth, so we don’t have an overdevelopment phase.
“We’re not awash with anything – we still basically have a shortage of property types, and the banks have been responsible.
“They are only lending to 75 per cent, so most owners have a fair bit of equity in their property, so we’re not going to get people under financial pressure like, say, the sharemarket.
“The sharemarket’s reacted dramatically, the property market is more stable that that.”
Collins points out if you’re in property, “it’s a long-term game”.
“If you speculate, you go and get burnt, if you’re in there for the long term, Queenstown will look after you well.”
He says the same fundamentals weren’t in place during earlier crises.
In the ‘90s, when people were already stretched, financially, and there was an oversupply of sections, people got tipped up when interest rates rose.
Heading into the global financial crisis (GFC), he says there was a total oversupply of managed apartments and people were borrowing 100 per cent against them.
The GFC was enough to tip up that market – “that sector basically halved in value” – and it also affected the market in general.
Collins says Queenstown’s key markets, Auckland, Sydney and expat Kiwis, are still strong, and, with many expats believed to be keen to return to New Zealand, the expat market could get even stronger.
He agrees the next few months won’t be good for tourism, but he believes Queenstown’s become more of a lifestyle resort – “there might be a third of your market now relying on tourism”.
Collins accepts there’s a risk where property owners’ incomes drop or their businesses fail.
“I believe banks will support businesses to get through that, but if they close down, that might result in some financial pressure on the market.
“The secondary commercial market may come under stress with small businesses struggling to remain profitable.”
There’s a risk, too, he says, where someone has leveraged their house to buy a business that is going broke.
“They may have to sell the house to keep equity in the business.”
Collins believes if there’s any vulnerability, it could be in the apartment sector.
“Managed apartments have enjoyed a few years of good income, so most should be able to sustain a few months’ downturn, but will hurt if we don’t have a ski season.”
He’s also predicting some softening in residential rents.
“We’re assuming there’ll be a bit of stock coming off Airbnb or short-term rentals that will move into long-term rentals, so that could create a bit more supply.”
What that means, he says, is rather than having 10 tenants in a house, you could end up having five.
“People are saying, ‘I don’t want to live in this environment any more, I’m going to rent my own property’.”
Landlords may get less rent, but Collins says that could be offset by lower interest rates.
“The worst thing right now is everyone’s negative attitude to life.”