Following an unusually prolonged period of growth, the Queenstown property market appears to be taking a breather – although there are many signs pointing to several areas of the market remaining at elevated levels for some time to come.
The balance of power is expected to shift to purchasers in 2019-2020, with value appreciation tapering off and a period of consolidation likely, according to a new report by Colliers International.
Colliers valuation director John Scobie says there was clear evidence that some parts of the Queenstown property market, such as its housing market, are showing signs of levelling off.
He says: “It’s important to note that while there has been a change in residential market dynamics, overall the Queenstown property market remains steady,” says Scobie.
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“There is still plenty of demand in the market driven by tourism, the area’s growing population and the ongoing construction boom – but we are now expecting any further growth to occur at a more moderate pace than we’ve seen in recent years.”
The median house price in the Queenstown Lakes District in the year to April 2019 was $1,140,000, compared with $645,000 in the year to April 2014.
This represents 11.9 per cent annualised growth over five years.
However, the Colliers report notes the residential property market in Queenstown appears to have entered a consolidation phase, with value appreciation expected to level off in the next 12 to 18 months.
In instances where vendor price expectations exceed those of purchasers, homes are taking longer to sell, especially those priced over $1 million.
Auction clearing rates are continuing to slow, with purchasers appearing to prefer priced stock. Older homes are also generally more difficult to sell, with buyers preferring new stock.
However, the report notes appropriately-priced sections and newly-built homes in Queenstown are generally still in high demand and selling quickly, especially in the larger subdivisions of Shotover Country, Lake Hayes Estate, Hanley’s Farm and Jack’s Point.
The Colliers report notes higher-value house and section sales have tapered off following the Government’s foreign buyer ban. However, the rejection of the Tax Working Group’s proposed capital gains tax appears to have returned some confidence to this market and sales activity has improved.
The lack of suitable stock for first-home buyers in Queenstown is still pushing purchasers to outlying towns such as Cromwell, Glenorchy and Kingston.
The Colliers report notes many Queenstown residents rely on renting out self-contained flats attached to their homes to assist in servicing their mortgages.
The increased desirability of ‘home and income’ properties is resulting in these properties commanding premium sale prices over comparable stock with no additional income potential.
However, with rents having levelled off, pockets of rental oversupply are beginning to emerge. In addition, there is increased risk in relying on rental income for home mortgage payments.
Residential rents remain very high in Queenstown compared with other centres, although rents have now reached an affordability ceiling for workers and have stagnated at current levels.
The report notes the median weekly rent for a three-bedroom home in Queenstown, Frankton and Arrowtown was $750 in the six months to 30 April 2019. That compares with $605 for central Auckland and $500 for central Christchurch.
The report concludes no significant further growth in rents is expected this market cycle.
Demand for rental houses is still steady in some locations, with limited supply of accommodation in peak seasons and an increase in supply being absorbed.
The unaffordability and scarcity of rental housing is impacting local businesses, as workers on low incomes struggle to find affordable housing.
