Tourism Recovery Helps Queenstown Buck Trend for Average House Price
While it certainly has cooled here in Queenstown over the past few weeks, but one thing that has remained hot is the tourism market which has recovered much faster and stronger than expected. Not only has this helped moderate the national economic slowdown but it has also helped insulate Queenstown from the general softening we are seeing across the national real estate market.
And nowhere is this more prominent than in the managed apartment and lifestyle investment sector where income levels are now surpassing pre-Covid levels in a number of cases. And when you look at the statistics for the first 6 months of the year it is not hard to see why:
Total passenger numbers reported for Queenstown Airport for the 6 months to June 2023 were 1,145,967. For the same 6 months in 2019 (pre-Covid) this figure was 1,135,336. Perhaps more interesting is that while the total passenger numbers so far for 2023 are on a par with 2019, domestic passenger numbers were down 5.6% while international passenger numbers were up 19.4%. And when you consider total arrivals are up by almost 80% on the same period last year from just 639,579, it is not hard to see why the town is struggling to cope with the visitor numbers we have been seeing.
QUEENSTOWN AIRPORT PASSENGER ARRIVALS (Source: Queenstown Airport)
We are also seeing a positive pattern emerge in visitor spending which is tracking at 9% above 2019 levels for the 5 months to May 2023. This growth has been driven by domestic spending (up 32% versus international spending (down 6%). While this is obviously in contrast to reported passenger numbers from Queenstown Airport, international arrivals are all ex-Australia and while this market has rebounded extremely strongly, arrivals from other longer haul markets such as USA, Asia, UK, Europe and China are still recovering.
QUEENSTOWN VISITOR EXPENDITURE (Wordline / Marketview Tourism Data Tool)
As we look ahead to summer, while it is likely we will continue to see a gradual softening in domestic visitor numbers as kiwis once again travel abroad, we expect any loss in this regard will be more than made up by increasing international visitor arrivals. Especially when you consider that for the 5 months to May while international visitors made up just 40% of total visitor nights they accounted for 53% of the visitor spend ($369,071,282 (YTD May 2023).
With all of the above in mind it is not hard to see why Queenstown has continued to buck the trend which saw the national QV House Price Index decrease by 3.4% for the 3 months to May 2023 while for Queenstown values increased 2.4% for the same period.
Il response to the above, local QV registered valuer Greg Simpson commented: “We note that there is currently reduced sales volumes and fluctuating but still positive value growth for residential property overall. The Queenstown Lakes District has selling prices that are above other districts and this is likely to continue given the recovery of the tourism industry and the general shortage of housing in the main centres of Queenstown and Wanaka.”
While this is obviously a commentary across the entire market, for the managed apartment and lifestyle investment sector, the ket drivers we have discussed above only strengthen the medium to longterm proposition for this style of property.
Income is recovering and in most instances is now on a par or above pre-Covid levels. This is particularly evident in the luxury end of the market where average room rates have increased dramatically and occupancy levels continue to run at very high levels – especially where staff shortages have been addressed and complexes are able to offer 100% of their capacity.
While the higher interest rates have seen a softening in demand from those buyers looking at the overall ROI and/or who require finance for their purchase, this has been more than offset by those more motivated by the “lifestyle” side of the equation who continue to be prepared to pay top dollar for the right property. Add to this the ongoing shortage of quality stock available in the market and we believe prices will likely hold for the coming 6 months as the market takes a collective breath after some exponential growth in values.
As we look further ahead to the coming summer and an influx of visitors from longer haul international markets – we expect to see prices begin to appreciate again. We also expect to see some of the new off-plan developments start to gain some traction in the market at that time which will also pull the market up due to the increased cost of construction and the prices these developments need to achieve to make them viable.
Over the past 6 months there were 46 sales across the major apartment complexes and units/apartments we would define as “lifestyle investment properties with a median sale price of $760,000 and an average ale price of $1,098,755. Prices ranged from $135,000 for a 30m2 suite up to $6,000,000 for a 400m2 plus luxury apartment. The saes have further reiterated that the higher end of the market has continued to appreciate and show strong capital gains while the same can’t be said for the lower end, especially those on fixed/guaranteed incomes.
As always, these dynamics will effect different sectors of the market in different ways. And, as always, we are happy to discuss this in more detail with you as required. Just drop us a line.
