Unprecedented tourism and population growth underpin a sustained peak in the Queenstown property market, according to a new report.
The annual Colliers International Market Review and Outlook says infrastructure development, economic growth, low interest rates and increased construction activity are also behind the historically high Queenstown and Wanaka markets.
“Demand exceeds supply across the board and some sectors, including rental housing and visitor rooms, remain at crisis point.”
The area has amongst the highest tourism and population growth figures, median house prices and median rental prices, in the country.
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Based on historic metrics, the current property market could be expected to falter, the report says.
“However, this cycle appears to be different. We believe this can be attributed to the extremely strong tourism market providing a catalyst for ongoing high demand for property, as well as underpinning continued construction growth.”
Total guest nights in Queenstown for the year to March 2018 were 3.6 million — 3 per cent growth compared to the previous year — and visitor spending had increased to $2.2 billion. Queenstown Airport passenger movements increased 14 per cent in the same year.
Queenstown’s resident population in 2018 is about 25,500 but this is expected to almost double in 40 years, providing an ongoing and strong driver to the property market.
To keep pace with infrastructure demands the Queenstown Lakes District Council is proposing a $1 billion work plan over the next 10 years. Other developments include a new primary school and expansion of the new Wakatipu High School.
Residential property in Queenstown is in extremely high demand, the report says. The median price of a house in April was $1,152,500 and the median section price was $500,000.
A lack of stock for first-home buyers in Queenstown was pushing buyers to out lying towns such as Cromwell and Kingston.
“However, market sentiment in Queenstown is moderating and sales volumes have levelled off from the highs of 2016.”
The report says “affordability ceilings” have been reached in secondary sales at the lower end of the market (in subdivisions such as Shotover Country) and prices are unlikely to go higher.
House rental rates were levelling off but Queenstown remained one of the most expensive places in New Zealand to rent a house with a median rent of $690 for a three-bedroom house in the six months to the end of April. Central-East Auckland median rates over the same period were $420.
The report says AirBnB listings have been singled out as contributing to affordability issues. Infometrics data showed “whole house” AirBnB listings in Queenstown make up 14 per cent of the total housing stock.
The council is planning to place restrictions on AirBnB rentals to protect the supply of long-term rental houses but the report warns that reducing the listings may exacerbate Queenstown’s visitor accommodation room shortage and cost local jobs.
The commercial property market is on a high with retail space in high demand and a critical shortage of industrial land available for development, meaning many developers were moving to Cromwell.
There is a shortage of yard-based industrial land in Frankton: “with around 8000 rental cars currently stored in the area (this number is likely to grow).”
Visitor accommodation remains in “extremely short supply” and the increasing cost of accommodation — the average daily room rate is $239 — has resulted in shorter average stay lengths and some tour groups using out of town accommodation.
However, there are 330 rooms under accommodation, 686 rooms consented and 1389 rooms at consent stage. Also, four new hotels had opened in Queenstown during the last year.
In Wanaka, the fast pace of growth has begun to taper off but the market continued to benefit from strong population and tourism growth.
Residential construction is booming yet “there is likely to be room for further expansion of the property market before demand and supply begin to equalise and we see the end of the current growth cycle.”