Queenstown – What’s Happening
This month’s report is written immediately after we enter Level 2 on the Covid-19 national emergency alert system. After 8 weeks of being confined to barracks and limited business activity, our office doors have reopened and we’ve pressed re-boot on business.
The most important commentary to offer is that Queenstown is clearly re-emerging with energy and activity. The roads are busy, there is good activity on the retail streets and in the retail centres, most businesses now have their doors open and staff recalled. Despite dire predictions I clearly identify tourists in our midst and even the occasional foreigner. After a drive to Dunedin last week, my family delighted in counting campervans – yes, and there were seven of them all proudly piloted by grey nomads as if answering the call to get New Zealand’s tourism restarted; as you can see I have found a new local economic health metric.
Air New Zealand resumed domestic flights to Queenstown, one daily flight each from Auckland and Christchurch. Queenstown is open for business.
From all in Queenstown we warmly welcome you to come visit. What a unique opportunity, few people, easy access to all activities and discounted services across the board. The skiing this year is looking to be a unique proposition with what the locals are predicting to be “low density” skiing as our Australian cousins will just have to watch from home this year.
Our data is reduced this month as www.realestate.co.nz did not publish data for April and our REINZ data set contains only 9 sales compared to 49 for March 2020 and 50 for April 2019. Although this is a number that we would have to return to the early 1970’s to replicate, it is hardly surprising given that this is a culmination of 8 weeks of lock down.
Only one residential dwelling, one apartment and seven land sales (two rural – five residential). Some sales will be contracts that formed prior to lockdown, others will have formed during. I expect most, if not all, will have transitioned from conditional to unconditional contracts during the lockdown period. There was confidence to complete contracts during lockdown.
www.realestate.co.nz did publish new listings to the New Zealand market for April. They noted that prior to lockdown there was a national weekly average of 717 listings per week, transitioning to a low of 188 per week mid-lockdown and recovering to 508 per week for the first week of Level 3.
My observation here is that listing numbers were low prior to lockdown and there has been no surge in supply. Supply remains low.
The Big Question – What will the market do?
This is the question that I am now asked multiple times a day. Time to dust off my rather unreliable crystal ball.
It is of course too early to give an opinion based on real data, but there is plenty to think about and it is generally more positive than most initial assessments.
The Queenstown real estate market will not react with any significant difference to that of any other district in New Zealand, the same key factors are at play. Yes, many tourism jobs will have been lost but many of those people were not property owners.
Consider these statistics provided by Tony Alexander: At the beginning of the 2008 financial crisis there were 58,000 properties available for sale in New Zealand and at the end of March 2020, there were less than 19,000 with the market in a clear shortage of supply. One third of New Zealand properties have no mortgage, home ownership is a low 62% and investors buying over the last four years have done so with at least 30% deposit. The bulk of people likely to be made redundant are young and unlikely to own a home, interest rates are at never before seen lows and heading towards zero.
First home buyers now have KiwiSaver equity and together with investor buyers have just had their brakes released with the removal of Reserve Bank imposed Loan to Value Ratios. Both first home and investor buyers are often in good equity positions with up to three years of savings behind them that were otherwise needed to reach the old LVRs. Investor buyers are motivated as in today’s world a 4 to 5% yield with security and capital growth is an attractive proposition.
This appears to be what is actually happening, at an anecdotal level enquiry on property is surprisingly strong from both first home and investor buyers although they perceive no hurry to purchase. Reports that I receive from the rest of New Zealand is that there is real activity in the lower value properties while in Queenstown the purchasers are enquiring but not yet acting as they wait for the fog to clear.
The salespeople are seeing too much enquiry from qualified purchasers for there to be an imminent collapse in the real estate market. Sure a price adjustment is inevitable and for many properties that is now already well underway. There will be a period of uncertainty and inaction as purchasers watch and vendors wait, but for those that are wanting to make the most of market opportunity, now may well be the time.
For more detailed dialogue speak with our salespeople today.
For more background read the latest Tony Alexander economic commentary. [See Tony’s View]
Bindi Norwell, Chief Executive at REINZ says: “The number of properties sold across the country decreased by 78.5% when compared to the same time last year which is not entirely surprising given that for the first 27 days of the month the entire country was in complete lockdown and sales could only take place via contactless methods such as online/phone auctions or using digital technology such as FlexiSign.
“Of the 1,305 properties sold across New Zealand, about half were sold in the first 10 days of lockdown (656 properties), followed by just 272 between 11-20 April which included Easter, and then an uplift in the last 10 days of the month with 377 properties sold,” says Norwell. [See REINZ report]
Westpac’s weekly economic commentary for 18 May 2020:
“In response to the gale force headwinds battering the economy, the past week saw significant further increase in both fiscal and monetary stimulus being rolled out”. [See Westpac report]
The onset of the Alert Level 4 lockdown brought significant disruption to the Queenstown residential tenancy market. Otherwise stable and reliable tenancies experienced financial hardship, and a transfer of properties from the Holiday Accommodation sector to the Residential Tenancy market changed supply status from balanced to over supply. Stability is returning, although not yet settled. There appears to be a about a 10% to 15% vacancy rate across the market and rents on the whole appear to have reduced to around 20% less than prior to Alert Level 4. Many tenants are taking this opportunity to upgrade their rental properties and there is a surprising amount of activity from tenants seeking to take on new properties. Landlords do however need to understand that rentals have changed.
Dropping to Alert Level 3 and then 2 has seen bookings for holiday stays re-start. Although not running at normal levels, bookings are being taken for stays in the near future and further out to early next year. Surprisingly it is not just New Zealanders booking; we are receiving reservations from international guests as well, although whether or not they can visit is yet to be determined.
Certainly a very difficult time for this particular industry, but we look forward to growing visitor numbers in Queenstown,
If you are thinking of a holiday in Queenstown, we have a great selection of holiday homes for you to stay in. Book here.
We look forward to talking with you soon.
Principal Agent and Director AREINZ MNZIS
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