This year will mark a turning point in the current property cycle, according to Colliers International’s 2011-2012 Queenstown market overview report released today.
The annual report highlights a number of factors which will benefit the local property market this year, including a resurgence in high-end residential property, strengthening yields on good quality commercial property, and commercial construction activity starting up in earnest.
John Scobie, head of valuation and research at Colliers International in Queenstown, says there are a number of positive factors at play which will benefit the local economy this year, with flow-on benefits for the property market.
“Increasing numbers of Australian visitors, residents and investors are boosting the region’s economy, along with the emerging Chinese visitor market which is growing at a rapid rate,” he says. “Queenstown International Airport’s growth rate projections are among the highest in the developed world, and high end travellers and investors are also continuing to discover Queenstown.”
He adds that the rebuild of Christchurch will greatly benefit the entire South Island economy this year, with a wide range of businesses being called upon to supply construction materials and services. However, there is still uncertainty around when the rebuild will begin in earnest.
Resurgence in high-end residential property
The increasing number of high net worth visitors and residents in Queenstown has resulted in a greater number of high end residential property transactions over the past year. This trend is expected to continue, says Scobie.
“A rise in overseas interest has fuelled increases in high value dwellings and prime sites, near to values seen at the peak of the market. Of particular note are lifestyle sites at Wyuna Preserve which have been selling for prices up to $2.7 million.”
There is also a strong trend towards high net worth national and international buyers developing superior quality homes on lifestyle sites, Scobie says. “The cost of homes being developed is significant, with construction budgets in excess of $5 million in some cases. Should any of these properties be put on the market, sales exceeding $10 million are likely.”
Good quality commercial yields strengthen
The Queenstown commercial property market appears to have stabilised, with a small number of sales transactions at strong yield levels having occurred during the past year, the report states.
Three CBD properties in Queenstown sold for a combined value of circa $14 million, showing an average yield of 5.3%. An off market transaction took place in the first quarter of the year, for a portfolio of central Queenstown commercial properties, with a total value of circa $90 million and indicating an overall yield of circa 6.25%. A prime commercial Arrowtown property also sold in June 2011 for $3.25 million at a yield of circa 5.4%.
“This activity shows the strong market dynamics that exist within Queenstown, and there appears to be good demand for what are considered boutique commercial property investments,” Scobie says.
Commercial construction activity restarts in earnest
The report also highlights several large-scale construction projects getting underway during 2012 in the Queenstown region – mainly centred around Frankton, the area which will largely accommodate Queenstown’s future commercial and industrial expansion, says Scobie.
Commercial property market confidence up
Meanwhile, Alan McMahon, Colliers International’s national director of research and consulting, says the results of Colliers’ latest quarterly investor confidence survey yet again show Queenstown commercial property investors to be among the most optimistic in the country.
“Queenstown is consistently one of the nation’s most positive centres when it comes to the commercial property market, owing to good tourist numbers and a tightly held CBD where property values have recovered strongly,” says McMahon.
In the March 2012 quarter Queenstown recorded a net 26% optimism in the commercial property market, coming off a net low in June 2009 of -43% net pessimism.
Download the full report here.
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