NATIONAL OVERVIEW: 

Reserve Bank Governor Alan Bollard said: “The New Zealand economy is recovering broadly as expected and growth is predicted to pick-up further through 2010.

The Official Cash Rate was held again (from 29 April 2010) at 2.50% for the eight quarter and is not expected to rise until mid 2010. 

Allan Bollard also commented; “Trading partner activity has recovered more quickly than we expected. Growth in Asia has been particularly strong. Consistent with this, export commodity prices have increased close to their 2008 peak. At the same time, risks to the global outlook remain elevated”.

“Notwithstanding the impact of stronger than expected export earnings, New Zealand households remain cautious, with the housing market and household credit growth subdued. Similarly, business spending is weak and firms continue to reduce debt”.

“On balance, we continue to expect the New Zealand economy to recover in line with or slightly faster than our March Statement projection. Annual CPI inflation, which has been close to 2 percent for the past year, is expected to track within the target range over the medium term”.

“As previously indicated, we expect to begin removing policy stimulus over the coming months, provided the economy continues to evolve as projected”.

Tourism remains positive with Tourism NZ reporting; “Australia continues to underpin New Zealand visitor arrivals, up 4.3 per cent (3,737) in February compared with 2009. However, other longer-haul markets are beginning to come back. International Visitor Arrivals for February 2010 were Australia: 91,275 - up 4.3%, China: 16,975 - up 40.6%, Japan, Germany and South Korea also up but with UK, US and Canada all down.

The outlook for farming remains mixed, with the industry still having to contend with the ongoing high exchange rate. The dairy payout increased 27 April 2010 to $6.10/kg milksolids is welcome news for both dairy farmers and the economy in general giving confidence to the industry and assisting the some 10% of dairy farmers who are said need to restructure or exit. Meat revenues remain high compared to the previous three years, but wool returns remain poor. 

Overall the economy is improving, but unemployment is still at 7.30 in December the highest for 10 years and close to the forecasted 8.0%. Here's hoping we too will soon enjoy some of the improved economic activity occurring in Australia, China and emerging Asia. 

LOCAL OVERVIEW:

QUEENSTOWN LAKES DISTRICT:

The Queenstown-Lakes region population (including Queenstown, Arrowtown, Wanaka, Kingston, and Glenorchy) is one of the fastest growing in New Zealand. 2006 census counts have recorded a population of some 22,959, up from 17,040 recorded at the 2001 census. This is an increase of some 35%.

The Queenstown residential market peaked during autumn 2008 and has since been trending downwards. The 2009 autumn/winter saw the lowest point so far for property values but the market rallied in spring with encouraging sales volumes through the warmer months. We are coming into autumn and agents are reporting very limited interest from buyers and growing numbers of listings. We’re predicting limited activity through autumn and winter this year and expect the median sale price to continue trending downwards. The greatest factor limiting the number of able buyers is the availability of finance with banks now looking to increase the quality rather than quantity of their lending. Forthcoming government decisions on the closing of investment property tax loop holes and GST might also be making buyers hesitant.

The following graph shows seasonal sales volume and median sale prices of dwellings since summer 2006 in Queenstown, illustrating a continuing easing in the volume of sales and a gradual downward trend in the median sale price since summer 2008 (this graph does not include property sales prior to the issue of Certificate of Title, or managed apartments):

 Queenstown Lakes District Seasonal Median Sale Prices

Queenstown managed apartment sales have been few and far between in 2010 and except for a million dollar three bedroom unit in The Rees the sales have all been in the lower end, under $500,000. There are still plenty of apartment listings out there but with banks running scared and finance companies now a thing of the past many interested buyers can simply not obtain finance. This has effectively put a halt to the entire upper end of the market. The biggest news in autumn was the Bayleys auction of seven Pounamu Prime units and six Bowen View units. Results are Pounamu Prime 2 bedroom units: $296,500 $361,000 and 3 bedroom units: $446,000 to $505,000. Bowen View 2 bedroom units: $345,000 to $421,000 and a 4 bedroom unit at $500,000. These sales were all very good buying showing there are still great bargains out there. The Kawarau Falls development approaches completion and it looks like The Hilton will be taking over two of the four hotels there. The apartment market is still very uncertain, especially in the upper end.

The graph below shows seasonal sales volume and median sale prices of apartments since winter 2005 in Queenstown.

Rural lifestyle: 2009 saw a median sale price of $1,320,000 on a total of 25 improved lifestyle sales in the Wakatipu Basin and surrounding areas including Wilsons Bay and Bob’s Cove to the west, Wye Creek to the south, and the Gibbston Valley to the east. 16 of these sales were over $1 million, seven of those being over $2 million and one of those being over $3 million.

Four months into 2010 we are now aware of four improved sales one of these being just over $1 million and two, as yet unsettled, at just over $3 million. The Queenstown market is oversupplied with vacant rural and rural residential sections and 2009 saw a median sale price of $510,000 on a total of 41 sales, only seven of these being above $700,000. A quick browse of local agents’ websites will reveal plenty of properties up for sale – enough supply to cover at least the next two years if current sales volumes continue which leaves potential buyers spoilt for choice. The median sale price is trending downwards across the district, backed up by anecdotal evidence from agents suggesting that vendors have to lower their price expectations to meet the market. Able purchasers in the upper end (i.e. those with a lot of cash) are looking for great value for money.

Queenstown commercial retail rentals are steady to easing with prime areas maintaining a hold on higher rates (although easing) whereas peripheral areas are pulling back. Agents are reporting that tenants are hard to come by for secondary areas and industrial space. The CBD is showing good occupancy levels for ground floor retail but we are aware of landlords offering incentives such as rent holidays to get quality tenants in. There are some good deals on offices out there due to an influx of supply from the new buildings. Industrial rentals are easing as vacancy creeps up. There has been little activity in the commercial sales department, yields are seen to be in the 5.50% to 7.00% range in the Queenstown CBD and 7.50% to 8.50% bracket for industrial.

Arrowtown has seen a consistent level of sales activity over the past two years with the median sale price also fairly consistent over this time. Like the rest of the district the market has been gradually trending downwards since 2008 but there were an irregularly high number of sales in the upper end through winter and spring 2009 which resulted in an increase to the median for that year. Coming into 2010 we predict the market to continue its slow downward trend with values easing and sales volumes remaining consistent.

Glenorchy has seen its first improved sale for two and a half years, this being a 1980’s dwelling that sold for $425,000. Kingston has shown much more activity through 2009 but also has one sale in 2010, steady activity for the township.

WANAKA 

The reported increase in residential property sales in the main centres is still to come to Wanaka. The market has remained quiet here with activity during the last three months or so mainly in the $350,000 to $575,000 range and only few sales above $600,000. Some recent low residential sales of good properties sadly indicate vendors are taking what they can get and moving on. A decline in market value continues, but with the occasional high sale occurring. The top end residential market that had been active in 2009 has also slowed with only one recent sale reported.

Recent lifestyle sales near Aubrey Road by Albert Town all below 2008 levels indicate this market is declining.

Vacant section values are mixed, with developers offering delayed settlements, price discounts or cash rebates to encourage buyers. There are a lot of vacant sections available for sale in Peninsula Bay, West Meadows, Riverside Park, Timsfield and Luggate Park but only limited buyer interest. 

The Wanaka apartment market like Queenstown remains shaky. Receivership sales in Queenstown (13) and mortgagee sales (3) due in Wanaka are unsettling the market, already being dictated by previous mortgagee sales and financially distressed vendors exiting. Loss of value from early 2008 of 50% or more is not unusual. Demand for apartments now is mainly from bargain hunters, with the situation unlikely to change until the receivership and mortgagee sales stop.

The numbers of residential rental properties being regularly advertised suggest Wanaka’s population is declining with people moving away to find work. Also vacant commercial properties are a reality of the ongoing recession. 

So where to from here; Wanaka is still a great place to live with winter and the ski season not far away. We look forward to our “Aussie mates” their economy now improving, arriving on mass again and buying something whilst they are here, bless them.

The graph below shows quarterly sales volume and median sale prices of dwellings since summer 2006 in Wanaka, illustrating an easing in the volume of sales and gradual easing in the median sale price since winter 2009 (this graph does not include property sales prior to the issue of Certificate of Title, or managed apartments):

CENTRAL OTAGO DISTRICT:

Autumn is now with us and winter is approaching, the first frosts have arrived and the autumn colours for which Central Otago is renown are now on full display. The grape harvest for the 2010 vintage is now nearly complete, yields are down but the quality of grapes is encouraging. 

Central Otago in general has had a relatively busy tourist season, particularly on the Rail Trail on which numbers continue to grow rapidly. There have been a range of sporting activities and this area of activity is a large growth area. 

The Real Estate market has showed variable results over the summer: Alexandra residential sales have shown a significant increase in sales volume, spring/summer 2009 over spring/summer 2008 with a substantial rise in median sale price to $275,000. March 2010 saw 11 residential sales with a median price of $287,000. Section sales have continued with a very low sales volume with only four sales in Alexandra for the first quarter of 2010 and five in neighbouring Clyde. There has with these been a small reduction in median sale price. 

Cromwell has shown a modest sales volume with a slight decline in median sale price to $322,500. Section sales have remained at very low levels, and there has been a decline rise in the median sale price.

Central Otago overall has shown a very low volume of vacant resident section sales, a decline in the median sale price to $148,500. Building activity has slowed to some extent, but some new homes continue to be built in and surrounding our main centres. 

Central Otago to some extent has been insulated from the recession due to high tourist traffic and movement of people from other areas and overseas into the attractive Central Otago environment, however there are signs of some weakness appearing in parts of the market. 

The rural lifestyle market throughout Central Otago has shown a significant reduction in sales volume and also in median sale price. Sales of vacant rural lifestyle blocks have showed a very significant drop in sales volume of some 60% when compared to the previous year and a significant fall in median sale price has taken place. 

The greater rural market for farm properties continues to show an exceptionally low sales volume, with no significant farm sales recently. There has been a limited number of orchard and vineyard sales, with no real strength in this segment of the market.

The continuing relatively high exchange rate continues to have effect on our traditional sheep and cattle prices together with export stone and pip fruit sales.

The industrial and commercial property market continues to show minimal sales volume and it is apparent that the demand for both commercial and industrial land has waned at this time. The level of commercial and industrial new building has considerably diminished in our smaller centres as the demand for space has fallen off. 

The graph below shows seasonal sales volumes and median sale prices of dwellings since summer 2006 in the Central Otago district illustrating the volume of sales and trend of the median sale price for the past three years, it is of interest that the median sale price has increased since spring 2009.

Central Otago Seasonal Dwelling Median Sale Prices

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:

Property Watch Spring 2009

Property Watch Winter 2009

Property Watch Summer 2009