Queenstown’s rapidly expanding tourism sector has driven the local economy, creating jobs which have supported, amongst, the fastest population growth in the Country. As the population has expanded so has demand for both residential and commercial property which has, in turn, triggered significant value growth and a development response.
Tourism Drives Economy
Tourist spending within the Queenstown Lakes District continues to grow, as evidenced by the latest figures published by the Ministry of Business Innovation and Employment (MBIE). Total tourist spending over the year to June reached $2.157 billion an increase of just over 27.5% compared with the same period two years ago. The growth in spending has been propelled by a 35% lift in international spending which in the 12 months to June reached $1.463 billion.
Spending has risen as tourist numbers have increased, reflecting the growing international reputation of New Zealand as a tourist destination and Queenstown as a year round centre for adventure tourism.
Capacity at Queenstown airport has risen with the introduction of night flights and an increase in carriers. In 2016 the airport saw 1.78 million passenger movements an increase of nearly 35% over the 2015 total.
The booming tourism and construction sectors have stimulated economic growth. The Queenstown lakes district boasts one the nation’s fastest growing economies. MBIE figures show the district to have generated annual average GDP growth of 5.1% between 2000 and 2016.
This growth rate compares with a national average, over the same period of 2.5% while Auckland has produced an average annual growth rate of 2.9%.
Population Growth to Outpace National Figures
The strongly performing local economy has generated jobs which has supported rapid population growth, growth which is projected to continue over the short to medium term future. Population growth in the Queenstown Lakes District has outpaced national averages over recent years and projections are for this trend to continue. The 2001 census population of 17,040 grew to 29,700 as at the 2013 census. By 2043 Stats NZ’s projections show the total to have grown to 57,400 under its medium growth rate scenario or 65,000 using the high growth rate model.
The medium growth rate of 2.2% annual average growth is ahead of projections for both Auckland (1.5%) and the country as a whole (1.0%).
The combination of local population growth along with national and international interest in Queenstown property has seen values rise sharply over recent years which has resulted in the area’s housing becoming, along with Auckland, the most valuable in the country.
As at the end of the June quarter 2017, the median sales value stood at $840,000 up 30% on the June 2015 total. The increase in values has reflected the fact that market conditions have been extremely tight over the last two to three years. As Realestate.co.nz figures show, sales volumes have been running ahead of long term average rates while new listings have sat at below average levels thereby squeezing the total inventory available for sale. As a result, the number of weeks to sell this inventory (based on current levels of sales activity) now sits at 17.6 weeks versus a long term average of 72 weeks.
As stated above, Queenstown based property has seen demand from throughout New Zealand and overseas. As the chart below, which shows the origin of purchasers of properties sold by Bayleys, illustrates, while local buyers form the largest single sector of the market, Auckland based buyers comprised approximately a quarter of the market over the first half of 2017. International buyers were involved in just under 10% of transactions with Australian and United States buyers being particularly active.
Over recent months sales activity has slowed and value growth plateaued, this is partly due to the impact of lending restrictions imposed by the Reserve Bank of New Zealand (RBNZ) upon investors in late 2017. Investors now require a depost of 40% when purchasing properties and this has had the effect desired by RBNZ of reducing investor activity.
In addition to the above however, sales activity is being hampered by a lack of new listings being brought to market. The shortage of options available within the market acts as a disincentive for current homeowners to sell as they are concerned that they will, in turn, have nothing to buy.
As the graph above illustrates the volume of listings being brought to market has been trending down for some time. Looking ahead however, there is a high chance that a lift in properties available to the market will emerge. This is due to the fact that over the last two to three years a large number of land subdivisions have been marketed. In a number of cases, following a successful sell down, the projects are moving to the development phase.
At Hanley Farm, for example, the first four releases of sections have now been sold, the issuance of titles is expected in late 2017 or early 2018 with construction to start shortly thereafter, it is likely therefore that the first homes will be completed in the second half of 2018. The first four releases comprised approximately 280 sections, on completion it is expected that the development will comprise approximately 1,700 sections.
At Frankton, earthworks are expected to begin in the final quarter of the year on the site of the Remarkables Residences. The first phase of the development will comprise 56 townhouses, a mixture of 4 bedroom units and 4 bedroom plus a studio. Agency reports advise that there has been strong interest with units selling at between $860,000 and $895,000.The Remarkables Residences are to be released in stages and upon completion will comprise over 200 homes.
At Woodlands, located at Quails Rise, 17 sections have sold down, the sections ranged in size from 920m2 to 5,310m2 and sold for between $525,000 and $625,000.
Development Sector Responds
Resource consent data published by Statistics New Zealand shows that the development sector is responding to the heightened levels of demand for housing. The number of building consents has increased by approximately 52% over the last two years with 1,025 consents having been issued in the year to June 2017.
The other notable trend has been the increase in the proportion of consents applicable to townhouse development. In the year to June 2014 townhouse consents accounted for just 2% of the total. In the 12 months to June 2017 this had grown to 23% of the total as developers look to meet the demand for more affordable housing.
Housing Infrastructure Fund to Accelerate Development
Queenstown has secured $50 million of infrastructure funding from the government which, it is hoped, will allow development to begin in three areas much sooner than originally anticipated. The funding will be used to build roads and water infrastructure thereby facilitating the development of up to 3,200 houses.
The funding, which mush be repaid, is part of the governments $1 billion housing infrustructure fund, announced in this year’s budget.
The funding is earmarked for new infrastructure at two greenfield sites, at Quail Rise South and on the Ladies Mile and an extension of the Kingston township.
Queenstown Property Sales