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A Remarkable Place Indeed

A Remarkable Place Indeed

Queenstown, in the lee of The Remarkables, is famous for its natural beauty and outdoor adventure, which adds up to one of the most appealing places to live and work in the country, Sally Lindsay writes.

By: Sally Lindsay

19 June 2024

A resort town nestled in the heart of the South Island’s Southern Alps, Queenstown is surrounded by stunning mountain ranges and crystal-clear lakes. The town is known for its adventure sports, such as bungee jumping, skydiving and skiing, but it also has a thriving arts and culture scene.

Queenstown is home to a wide mix of cultures and ethnicities. People of more than 40 nationalities live permanently in Queenstown, where the population is small compared to other urban areas of New Zealand. However, the region has some of the country’s highest population growth figures.

Getting around Queenstown is relatively easy, either on foot or by bike. The town centre is compact and most amenities are within walking distance. You can stroll along the lakefront and enjoy the stunning views of Lake Wakatipu and The Remarkables. If you need to travel further afield, you can use a local bus or drive. Taxi and ride-sharing services are also at hand.

In terms of weather, Queenstown is a pleasant place to live all year round. The region enjoys long summers, with an average temperature of 17 degrees, and is a great time of year to enjoy the region’s many water-based activities, including jet-boating and white-water rafting.

Winters in Queenstown are cool and crisp, with an average temperature of six degrees, opening a wide array of snow sports on four nearby ski fields.

An international hub that attracts visitors from all over the world, tourism plays a major role in the town’s economy, with employment opportunities related to tourism, food services and accommodation.

Jobs Boom

This has led to a boom in hospitality jobs, with many hotels, bars and restaurants looking for staff to cater to the needs of tourists.

While the winter months offer plenty of seasonal work, other key industries include construction, retail and professional, scientific and technical services.

The resort town offers various residential housing areas. Accommodation includes serviced apartments, hostels, hotels, lodges and resorts. Visitors and residents can choose between budget accommodation and more luxurious options.

The colours of Queenstown.

The cheapest place to live in Queenstown is outside the centre. Most of the outer suburbs are a short drive from the town centre. Suburbs such as Fernhill, Sunshine Bay and Kelvin Heights are peaceful places to live, away from most of the tourist bustle but still a convenient distance from major amenities.

House prices have bucked the national trend. The median March house price of $1.357 million is consistent with the $1.3-$1.4 million price established over the past 18 months, although it was down 13 per cent on February’s price, but down only a minor 4.4 per cent on the same month last year.

CoreLogic data shows prices were up between 0.8 per cent to 12.5 per cent from April 1 last year to April 1 this year.

At Sunshine Bay prices rose 12.5 per cent from $938,300 to $1,055,300, followed by Lake Hayes Estate where prices were up 7.2 per cent from $1,307,700 to $1,402,250. Prices in Fernhill also increased 7.2 per cent from $1,099,600 to $1,178,400, and Jacks Point up 5.2 per cent from $1,915,250 to $2,014,450.

At the other end of the market Arthurs Point prices rose 0.8 per cent from $1,433,250 to $1,444,400, while Albert Town prices went up 1.1 per cent from $1,411,000 to $1,426,550 and Wanaka 2 per cent, from $1,896,350 to $1,933,900.

Desirability Factor

Although Queenstown’s house prices are high, Professionals Queenstown principal Adrian Snow says sales numbers are comparable to last year.

Since Queenstown is a tourist resort town, it’s more expensive than most other areas of New Zealand. While the town is beginning to feel the same economic conditions as the rest of the country, it has meant more prudence as well as conservatism, he says.

“Buyers are being more cautious, but sales numbers are only 4 per cent down on March last year.

“We’ve bucked the national trend in sales and prices. When median sale prices in most regions were dropping last year, Queenstown continued to grow. Auckland prices were falling, for example, and Queenstown was probably the only region where they consistently increased over that same period.”

Prices do go down from time to time, but it’s the desirability of the market that keeps them up, Snow says.

Also helping is strong migration into the district from people across the world. Many Aucklanders make up this number.

“They want to buy and move down, making a lifestyle choice. That was accentuated after Covid, the lockdowns and border closure phase. It gave people time to reflect on what they really wanted to do. We are also reaching the end of the baby boomer tail, with many people now retiring. A lot of people are also moving here for employment,” Snow says.

CLOCKWISE FROM TOP LEFT Cardrona is a major tourist drawcard; Queenstown is a great shopping destination; the picturesque waterfront; Shotover jet in action; dining at Amisfield is a must.

Property investment has been hit hard, he says. It has become less attractive to buy investment property in Queenstown mainly because of high capital costs, Healthy Homes legislation, strengthening of tenancy rights under the RTA, Tenancy Tribunal decisions, tax changes and the biggest disincentive – rising interest rates.

“Queenstown rents are among the most expensive in the country, but landlords’ purchase and operating costs are probably among the highest in the country as well.”

Picking Up

While it’s early days, Snow believes the government’s relaxation on the RTA and the pulling back of the tax changes will slowly make Queenstown property investment a bit more attractive, particularly when interest rates drop, making yields more adequate. He is already seeing more investor buyer sales than this time last year.

Many expats or buyers from other parts of New Zealand are joining forces to buy a property – not necessarily for the rental market because they don’t want the hassle, but they might put it into holiday accommodation, which is quite a strong business model for Queenstown, given tourism demand.

Snow says many people have holiday homes in Queenstown and traditionally the market has exhibited stronger than normal capital growth. “Since 2012, the median house price has risen at an annual compound interest rate of 9.8 per cent. So, if buyers can afford a home here, it’s not a bad place to let it sit and grow in value.”

In the past 12 months, Snow says there has been strong activity from first-home buyers, even though the median price is well over $1 million. “Queenstown’s a little bit abnormal from probably most other regional markets in that it does have a wide range of property types, from modest duplexes, three-bedroom type homes and apartments.”

The cheaper homes are three-bedroom unit titled duplexes built in the mid-1980s through to the 1990s in some of the older suburbs, such as Fern Hill and Sunshine Bay in the $900,000 to $1.2 million range.

Any properties below the median price have been selling well, typically to buyers with well-paying jobs, who can see now is their window into the market while investors aren’t that active, Snow says.

The historic mining town of Arrowtown is affluent and beautiful.

Rental Shortage

While prices for houses are high and rising, rents are in the same basket. Finding affordable accommodation can be extremely competitive.

Bayleys Property Management Queenstown general manager, Richard Hoskin, says this is because historically there’s never been enough rental properties.

“Demand outweighs supply, but in saying that, it’s a better situation than it was 12 months ago because there are a few more properties available, with people breaking their leases and choosing to leave town for a variety of reasons – the cost of living is too high, their employment has changed, or they are just choosing to return to where they came from.”

At the beginning of last month 66 rentals were advertised on Trade Me. In May last year 16 properties were advertised, and in June just seven.

Snow says there aren’t the extreme pressures that existed post-Covid. “When the borders opened, and employers started ramping up staff numbers without offering accommodation, that brought on the rental crisis. Employees were left to try and find their own.”

Many stories circulated of people couch surfing, living in their cars or anywhere they could find.

Hoskin says while there has been a big rise in rentals advertised this year, it’s not huge considering there are 20 property management companies in Queenstown and across all of them there are only 66 advertised properties. “It’s quite a dynamic situation.”

Typically, there are always more applications from tenants than there are properties available. Most of the renters are in the hospitality sector, although families are also in the mix, particularly those with long-term employment.

The Market

Rents are expensive and Hoskin says they have not reached their ceiling yet. “Queenstown is a destination and people want to come and live here and the demand vs supply keeps pushing rents up.

“There are some nice homes available to rent, but equally, there are a lot of older generational properties that have been held in families for a long time and are rented out.”

The average price of a typical three-bedroom home, dependent on its location and quality, can range anywhere from $850 to $1,300 a week, and a two-bedroom can be $600 to about $850 a week.

“We had a professional couple just recently rent a lovely three-bedroom property at Jacks Point for $1,350 a week. Not everyone can afford to do that, but there are people who are paying those sums of money.”

Renters rarely have a choice about where they want to live in Queenstown. “A few years ago, there may have been the opportunity for people to choose because there were more properties available. Now, it’s where the properties are available and are they prepared to live in that property?” Investors or new owners of rental properties are thin on the ground. Hoskin says they are not running back into the market, although the government is making it easier. “The sense is they are sitting on the sidelines until the government’s changes kick in. Once that happens we are likely to see more rental owners in the market.”

Lack of rentals and high rents are hampering the Wanaka market.

High Rents Not Helping

Lack of rentals and increasing rents are hampering the Wanaka market.

“It’s difficult for tenants because rents have gone up by $30-$50 a week in the past 12 months for the average three-bedroom home and the supply has not increased,” Colleen Topping, owner and director of Home & Co says.

Her company manages $260 million of Wanaka property and despite the lack of rentals her business is still increasing.

One sticking point that has arisen recently is tenants’ increasing resistance to paying higher than average rent. “We’ve had to ask a few landlords who are wanting $1,000 a week plus to lower their rents. Even wealthy people find that a bit steep.”

Topping says although they are above average homes and landlords’ insurance and rates are rising, there is a finite point where tenants just won’t continue to pay super high rents, or alternatively they want to have, say, six people living at the property and that is not what the landlord wants. “Most landlords are good, but they want a cap on the number of adult bodies in their homes.”

Even though Home & Co is happy to advertise a property at any rent the landlord wants, it always recommends a reasonable rent because otherwise it is going to be over promising and under delivering.

When there is no traction in getting tenants for a property, a landlord will generally lower the rent. For example, one landlord had a four-bedroom home advertised at $1,200 a week. When there was no inquiry, it was dropped to $980 a week and tenants were found. Another started at $1,500 a week and is now being advertised at $1,200 a week but still has no tenants. The new home has been advertised since January, but has building continuing next door and Topping says that might be seen as a negative by prospective tenants.

However, it is not the case all the time. Topping has let a property for $1.300 to happy tenants, who decided it was desirable to live there, but she says generally the market is tight for attracting tenants when rents are more than $1,000 a week.

A recent influx of immigrants has tightened the market. “We have plenty of people wanting to rent their properties but it is never enough to meet demand, particularly when there are plentiful jobs in the aged care sector and new big box retailers opening.

“Plenty of renters arrive and leave if they can’t get accommodation. Some have taken to contacting Airbnb owners direct to see if they can convince them to turn their property into a long-term rental. Whether they actually have proper tenancy agreements I am not sure.”

She says there are still plenty of empty houses as Wanaka has a large holiday home sector. “Three years ago holiday home owners were nervous about renting their property because there was a perception they might not get it back, but that attitude has softened and is changing and we are now renting properties on six-month leases during the winter.” ν

Investing In Queenstown

For more information about investing in Queenstown go to https://otago.nzpif.org.nz.

Corelogic Queenstown

Kelvin Davidson, Chief Property Economist

The data

Rental data is sourced from the Ministry of Business, Innovation and Employment based on rental bonds lodged. This data is supplied grouped into geographic areas based on statistical area units used by Statistics NZ for the census and as a result do not always match well with common usage suburb names.

The rental data for each area is matched to property price information from our database to determine property prices and therefore yield. The yield is calculated as the annualised rental income divided by the median property value calculated using our E-Valuer.

Market Composition

The rental market across Queenstown-Lakes is dominated by houses, which is normal for most parts of the country, although this area also has a fair share of apartments. Of the 369 properties recently available on the market for rent, 270 have been houses (73 per cent), with 27 flats (7 per cent). That leaves 72 apartments, or 20 per cent of the properties recently available for rent.

Most of the flats (21) have been in Queenstown/Frankton/Arrowtown, with a handful in Wanaka (six). Queenstown/Frankton/Arrowtown has also had the most apartments, with 57, followed by nine in Wanaka and six in Queenstown Central. Flats have represented 9 per cent of all properties recently available for rent in Queenstown/Frankton/Arrowtown.

Turning to houses, there have been none for rent lately in Queenstown Central, whereas Queenstown/Frankton/Arrowtown had 162 and Wanaka 108. In the latter, houses have been 88 per cent of all properties recently for rent, with 68 per cent in Queenstown/Frankton/Arrowtown.

House Size, By Bedroom Count

Looking specifically at the 270 houses recently for rent across Queenstown-Lakes, a handful have had five bedrooms (six properties or 2 per cent, all in Wanaka), while 30, or 11 per cent, have had one bedroom (all in Queenstown/Frankton/Arrowtown).

In the two-bedroom bracket, there have recently been 30 houses for rent in Queenstown/Frankton/Arrowtown and 15 in Wanaka. That category has accounted for 19 per cent of all houses recently for rent in Queenstown/Frankton/Arrowtown, and 14 per cent in Wanaka.

There have been a total of 63 four-bedroom houses recently for rent, split by 36 in Queenstown/Frankton/Arrowtown (22 per cent of houses recently for rent in that market) and 27 in Wanaka, which is 25 per cent of activity in that market.

And finally, the biggest bracket for houses is three bedrooms, with 126 properties recently available for rent (47 per cent of all houses), split 66 in Queenstown/Frankton/Arrowtown and 60 in Wanaka. That’s 56 per cent of all houses recently for rent in Wanaka, and 41 per cent in the former.

Rent And Yield

By matching average value to rent we can look at gross yield for three-bedroom houses in each area.

Median weekly rents for three-bedroom houses across Queenstown-Lakes have ranged from $760 in Wanaka up to $980 for Queenstown/Frankton/Arrowtown. Those are high rental rates, but property values are elevated too, ranging from $1,503,300 in Wanaka, up to $1,779,150 in Queenstown/Frankton/Arrowtown.

The upshot is that gross rental yields for three-bedroom houses across the area are relatively low by national standards, coming in at 2.6 per cent for Wanaka; and less than 3 per cent in Queenstown/Frankton/Arrowtown.

However, rents themselves have been growing very strongly in these markets, with a rise of almost 9 per cent in Wanaka over the past year, and more than 15 per cent in Queenstown/Frankton/Arrowtown.