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NATIONAL OVERVIEW:
“Domestic activity has continued to expand at only a modest pace despite relatively strong commodity prices. More recently, domestic business confidence has fallen back somewhat. Further ahead, earthquake repairs and reconstruction in Canterbury are still expected to provide significant impetus for demand. “As foreshadowed at the time of the September Monetary Policy Statement, there is a real risk that the European sovereign debt crisis could cause a further slowing in global activity, putting downward pressure on New Zealand’s commodity export prices. The difficult international market conditions could also result in increased New Zealand bank funding costs over the coming year. “Annual headline CPI inflation continues to be above the Bank’s 1 to 3 percent target band. That largely reflects the one-off effect of last year’s increase in the rate of GST. September quarter inflation data suggest that, once GST and other one-off influences have passed, underlying inflation is settling near 2 percent. “Given the ongoing global economic and financial risks, it remains prudent to continue to keep the OCR on hold at 2.5 percent for now. However, if global developments have only a mild impact on the New Zealand economy, it is likely that gradually increasing pressure on domestic resources will require future OCR increases.” Elsewhere, tourism remains mixed; as at September 2011 visitor arrivals from Australia numbering 1,122,594 up 0.1%, arrivals from Canada, China, Singapore and Malaysia up 2.3 to 47.1.0% and arrivals from UK, Germany, USA, Japan, South Korea, Taiwan, Hong Kong, India and Thailand down some 0.1% to 15.3. Annual net migration has eased to 3800 as at to June 2011. The outlook for farming continues improving but remains mixed, the industry having to contend with ongoing high exchange rates. Fonterra’s 2011/12 forecast initially set at $7.15 to $7.25/kg milk solid was reduced in October 2011 to $6.70 to $6.80/kg milk solid, with Fonterra’s Chairman Sir Henry van der Heyden saying the lower milk price reflected a continued softness in commodity prices and a stronger New Zealand dollar. Other farm revenues remain high with increasing lamb, beef and crossbred wool prices. Unemployment has increased to 6.6%, however the NZ economy is improving slowly and growth is predicted for late this year and next year and the outlook for farming particularly dairying and exporting remains optimistic. Regardless large scale debt restructuring and reduction remains an ongoing reality in the farming industry and elsewhere mortgagee and receivership sales continue. New bank lending remains tightly controlled to all categories of borrowers. Business and household confidence however is improving and real estate markets appear to be slowly recovering. LOCAL OVERVIEW: QUEENSTOWN LAKES DISTRICT: Overall 2011 has been much the same for the Lakes District property market as the previous two years. Median sale prices remain flat to slightly easing with Arrowtown, Queenstown and Wanaka now all sitting very close to $500,000. It’s still a buyer’s market and with limited expectation for an increase in property values through the short term there is little urgency being shown. Queenstown: For 2011 the Queenstown residential dwelling market continues much the same as the past two years. Sales are still ticking over at a similar rate and the median price remains flat to easing, now some 10% back from the peak. Vacant residential sections in Queenstown have been selling at consistent levels since 2009 with the median sale price easing back over this time, now some 20% down from the peak in 2008. The Queenstown rural lifestyle market remains quiet through 2011, consistent with activity over the past two years. Sales for improved lifestyle properties are scattered but generally range from $1m to $2m with a number of exceptional quality properties selling for up to $6m. Vacant lifestyle sales were limited in 2010/11 with prices also scattered. Buyers are scarce while vendors are reluctant to sell in a weak market. This has resulted in limited sales activity and where sales are occurring the market is moving toward the extremes. Cashed up foreigners willing to pay top dollar for premium property represent one end of the extreme while bargain hunters looking for must sell situations represent the other. The Queenstown apartment market remains quiet through 2011 and is now dominated by the ongoing developer’s sell down in The Rees. This sale enables buyers to get a new managed apartment with new furniture at a lower price than what many now dated apartments in the resort originally sold for. This explains why little else is currently selling except where vendors have decided to meet the market or buyers are prepared to pay a premium for a superior unit (which generally means a better location closer to town). Sales in The Rees have now pulled the median sale price for the apartment market back up from its 2010 low point. Stage One of the Kawarau Falls development has reached completion but we are unsure if/when the hundreds of units in this development will hit the market. Oversupply of apartments in Queenstown is still very much a reality. With a quieter than normal winter tourist season, returns remain limited to apartment owners and flexible management options are sought after by buyers. The following graph shows the seasonal median sale prices and sales volumes for residential dwellings in Queenstown since winter 2008. The yearly moving average trend line in red shows the median sale price remaining relatively flat since 2009 and easing slightly through 2011 to the $500,000 mark. Sales volume has been contained within a range of 52-100 per season. As sales continue to settle we expect the number of sales in the last period to increase and the median sale price for that period to adjust accordingly.
Queenstown Lakes District Seasonal Median Sale Prices
Wanaka: After additional activity recently in the $300,000 to $800,000 range, the market appears to have slowed again with fewer sales in October and vendors now more inclined to accept reasonable offers. The markets away from Wanaka; Albert Town, Hawea and Luggate however continue to remain very slow with few sales occurring. The overall decline in property values continues, but with the occasional sale above market level. The $400,000 to $600,000 residential market is tight with no sign of values lifting. The top end residential market is slow, but with some sales in the $1,300,000 to $2,000,000 plus range. The higher end of the market can still attract buyer interest at 2008/09 value levels, along with well designed and well built homes with Lake Wanaka and alpine views. Only a few vacant section sales are occurring, but with quality sections in Peninsula Bay once again achieving $300k and more. Price rebating that was common earlier this year appears to have all but stopped. The apartment market is fragile if not shaky driven by bargain hunters, without any sign of recovery or confidence returning. The lifestyle market remains quiet with few improved sales reported, prices often well below historical value levels and minimal to no buyer interest in bare land blocks. The situation with vineyards is similar with only minimal buyer interest and no recent sales reported in the Clutha area. Vacant lifestyle block sales in the Clutha Valley from $90,000 to $210,000 are not unusual. It is apparent the effects of economic recession and loss of the 25 to 40 year old demographic group (particularly building sub-contractors), Christchurch earthquakes plus recent problems in the dairy and grape growing industries continue to be felt through out Central Otago and Queenstown Lakes districts, with reduced demand for all property. Having said that Cantabrians are seeking to relocate here. The greater rural market for farm properties continues to show a low sales volume overall but some recent sales suggest confidence is slowly returning. The following graph shows the seasonal median sale prices and sales volumes for residential dwellings in Wanaka since winter 2008. The yearly moving average trend line in red shows the median sale price has remained relatively flat since 2009 at just over $500,000. Sales volume has been contained within a range of 24-60 per season. As sales continue to settle we expect the number of sales in the last period to increase and the median sale price for that period to adjust accordingly.
CENTRAL OTAGO DISTRICT: Central Otago has had the benefit of a relatively mild winter and good spring rainfall, the green on our hills is spectacular, the fruit set on our orchards has been very good, our vineyards are bursting into leaf. The primary sector continues to be boosted by favourable milk, meat and wool prices. It has been encouraging to see that in some areas, there has been an improvement in sales levels. The rural market in particular has shown a significant increase in sales, particularly for farming properties. We are aware of one significant recent sale of a vineyard property at Bannockburn, however there have been no sales of orchard properties. There has been an improvement in sales in improved lifestyle blocks but with a relatively steady median sale price, a good recovery in sales of vacant lifestyle blocks with an improvement in the median sale price. Sales of residential properties improved considerably over winter in Alexandra but there has been little change in sales activity or in median sale price in Cromwell. There has been a very small increase in the volume of sales of residential sections in Alexandra with a steady median sale price, Cromwell has had a very low sales volume and a declining median sale price There has been practically no activity recently on the industrial and commercial property market. We note there remain a number of vacant commercial and industrial premises, both in Alexandra and in Cromwell. On a cheerful note, the push to extend the cycle trails in Central Otago is gaining momentum with a start to be made relatively soon on the trail from Alexandra to Roxburgh, the busy Central Otago Rail Trail season has commenced earlier than ever this spring. The following graph shows the seasonal median sale prices and sales volumes for residential dwellings in the Central Otago District since autumn 2008. The yearly moving average trend line in red shows the median sale price easing since the peak of the market in 2008 and remaining fairly flat since 2009. Sales volumes have ranged in a band of 53-85 per season over the past two years. As sales continue to settle we expect the number of sales in the last period to increase and the median sale price for that period to adjust accordingly.
Central Otago Seasonal Dwelling Median Sale Prices
As the graphs are based on settled sales data, the most recent period in any graph will continue adjusting as sales with longer settlement periods continue to settle. Note all graphs were updated November 2011. Moore & Percy are property professionals providing you with the best possible independent advice, and together with our wide network of financial and legal experts, can help you make the right decision. Call us, its easy - 0800 344877. To view previous copies of Property Watch please click on the links below: |
The Reserve Bank reduced the Official Cash Rate (OCR) 50 basis points to 2.5 percent March 2011 and allowed it to remain the same as at 27 October 2011 with Governor Alan Bollard commenting: 
