Queenstown property market seeing continued growth despite uncertainties

Queenstown’s property market remains resilient despite another year of Covid-related interruptions.

Population growth and a positive property market sentiment provide confidence in Queenstown’s long-term prospects as the area shows signs of maturing from a centre focused heavily on tourism to one encompassing a more diverse collection of industries.

That’s according to Colliers’ newly-released Otago Market Review and Outlook 2021-2022, which covers the key markets of Queenstown, Wānaka, Cromwell and Dunedin.

Heather Beard, Director of Valuation at Colliers Queenstown, says that despite a predicted downturn, demand continues to outweigh supply in the resilient Queenstown residential market with sales prices hitting record highs and clear evidence of consistently elevated demand.

“This is in part due to new residents moving to the regions, including ex-pats returning home. For some, lockdowns brought to light the importance of living in a place with opportunities for outdoor experiences and lifestyle options and, along with the increasing acceptance of remote working, this has made the Queenstown-Lakes District appealing.

“Increased demand and value appreciation is being seen in higher density neighbourhoods, with new homes generally taking precedence over older stock, particularly with investors due to new government regulations. This has left room for the first home buyer market to take on and add value to the district’s more established property stock.

“Despite the property market performing strongly, some risk remains with the increasing OCR flowing onto an increase in interest rates for mortgage holders.

“In the commercial market, we are also seeing some strong transactions in particular for centrally-located assets, suggesting a high level of confidence in the CBD market, though some vacancies have appeared in secondary and fringe areas. A return to pre-pandemic levels of business is anticipated in the long term, and projected visitor and population growth figures from QLDC back up this assumption”, says Beard.

“Ongoing border closures, CBD roadworks and parking issues have seen some tenants end their tenure in the CBD, with some choosing to move to Frankton. Many locals are choosing to shop in the Frankton area due to its convenience to established and high-growth residential neighbourhoods.

“While the ongoing lockdown in Auckland has taken a toll on the hotel and tourism property sectors, demand for tourism properties has remained strong, again with a focus on central CBD positions. Three new hotels are due to open across the Whakatipu Basin in the next 6 months. The market also remains active for properties with development potential.”

Regional highlights:

• Wānaka’s residential property market remains strong, with reduced time on the market for listings across all sectors. Housing stock is low with limited greenfield developments on the horizon, pushing up the price of existing properties and land.
• Wānaka’s commercial property market remains strong, with demand outweighing supply. Activity is primarily underpinned by the local market with a limited number of tourism operators in the CBD. Ongoing border closures have not greatly impacted Wānaka’s commercial market.
• Cromwell’s steady growth continues as it maintains its role as a central hub in the region. The Central Otago District Council has dedicated $42 million to developing the Arts, Culture and Heritage Precinct and upgrading the town centre, which may further increase its popularity for residents and businesses.
• A new industrial estate for Cromwell will meet the high demand for centrally located industry in the area. New vineyard developments are also emerging to meet the demand for quality Central Otago wines. 
• Dunedin’s property market has not been adversely affected by the pandemic, with increased student enrolments and population growth boosting demand.
• Major capital works in the pipeline are ensuring the continuation of the southern city’s popularity as a place to live and work. While there is little in the way of industrial development, some new commercial properties are in construction, a rarity for Dunedin.

Further regional insights are available in the full Colliers Otago Market Review and Outlook 2021-22.