Colliers has released its annual wrap-up and predictions for the Otago property market, highlighting a common theme of cautious optimism in most sectors.
The 2024-2025 Colliers Otago Property Market Review and Outlook, which covers Queenstown, Wānaka, Dunedin, and Cromwell, states that while prevailing sentiment remains largely ‘wait and see’, several factors provide reason to believe a turning point is emerging.
The local positive drivers include migration and tourism growth, combined with economic factors such as the interest rate outlook.
Heather Beard, Director of Valuation at Colliers Otago, says these market drivers are giving investors confidence in the region’s long-term economic and property market growth.
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“The attraction of Queenstown and Central Otago as a lifestyle choice for people leaving the main cities remains strong,” Beard says.
“While this has anecdotally slowed due to it becoming harder to sell properties in Auckland, the trend for people to shift south and work remotely is still a good positive driver for local property values.”
The region’s tourism market recovery is now in a maturing stage post Covid. Queenstown Airport passenger arrivals have fully recovered following the pandemic, with total passenger arrivals (domestic and international) during the 2023 year slightly ahead of the 2019 year.
Arrivals for year-to-date 2024 (to July) are also tracking ahead of the same period in 2019.
However, subdued global economic conditions have dampened the recovery of the local tourism market, with lower spending by both international and domestic visitors.
At the same time, the tourism sector remains a crucial component of the local economy and employment rates in the sector have soared.
Sustained high interest rates and consumer belt tightening have led to a softening and slowing phase in local property markets, with buyer demand drying up and low transaction volumes, Beard says.
“With uncertainty and challenges facing both buyers and sellers in the market we have certainly seen the ‘wait-and-see’ approach play out this year.
"However, there are still pockets of stronger activity, for example the lower value and first home end of the Queenstown residential market.”
Queenstown residential property in general has also bucked the national trend of falling residential values, with weak growth across many areas of the market.
High-quality, well-tenanted commercial property in good locations across the region continues to attract investor demand, although transaction volumes are low and the resulting lack of pricing benchmarks is challenging the market.
High construction costs are restricting the addition of much-needed new stock in key locations, leaving tenants unable to expand or enter markets such as the Wānaka CBD, central Dunedin, and the Frankton commercial precinct.
This trend is benefiting up-and-coming commercial locations such as Cromwell, where more office, trade-related, and industrial occupiers are establishing a presence.
The town continues to act as a regional hub with businesses able to service clients in both Queenstown and Wānaka, at much lower rent levels.
Beard says the overall market sentiment across the region is expected to continue to improve into 2025, especially given the improved outlook for interest rate cuts.
“We expect transaction volumes to pick up as the effect of decreasing interest rates gradually begins to flow through into the market. However, highly geared homeowners will continue to be challenged until we see any significant effect on mortgage rates, which is still a long way off.
“Well capitalised investors with a long-term positive view on key drivers such as migration and tourism will continue to be active in the market, until interest rate cuts begin to encourage more widespread buyer demand.”
- Supplied by Colliers
