Welcome
Our annual wrap-up of the key property market drivers, trends and projections in the main centres across the Otago region highlights a common theme of cautious optimism in late 2024 and into 2025.
The persistence of high interest rates and inflation is exerting ongoing pressure on household incomes and resulting in softer retail spending. Like the rest of the country, property sales volumes are down across Otago and a buyers’ market dynamic persists. Prevailing sentiment in the market is generally ‘wait and see’, with owners holding on to property assets if they can.
There are signs of a turning point emerging. Internal migration and tourism growth trends are still positive drivers for the main property markets across Otago. Remote working and lifestyle factors continue to be key attractions for people looking to move to the region from the main centres. There are also good professional and trade employment opportunities in Otago, with several key infrastructure development projects underway. Tourism is in a late recovery phase, supporting local businesses, although visitor numbers, and the amount they spend here, are yet to reach pre-pandemic levels.
With these factors in mind, confidence in Otago’s long-term economic and property market growth is reasonably good. However, the high cost of living and affordability for highly geared borrowers will continue to affect the market over the medium term, until wage growth occurs and interest rate cuts begin to lessen pressure on household budgets and encourage renewed buyer demand.
The Reserve Bank of New Zealand (RBNZ)’s long awaited move to finally begin easing monetary policy in August 2024 was welcomed throughout the property market.
The 25 basis point cut to the official cash rate (to 5.25%) was the first reduction in more than four years. RBNZ said price pressures were cooling and it expected annual inflation to fall back to its 1-3% target band in the September 2024 quarter.
Property Value and Official Cash Rate (OCR) Correlation
*As at August 2024. Source: RBNZ.govt.nz & Colliers Otago
High interest rates exerting more pressure on homeowners and buyers, as mortgages come up for review
Interest rate cuts will have minimal impact on cost of living affordability until wage growth eventuates
Queenstown Property Market Overview
Historically, Queenstown’s property market has followed roughly 10-year cycles between peaks. Based on this pattern, we would have expected the market to begin to falter in around 2018, following a period of sustained value increases. However; unprecedented growth in tourism and population, along with low interest rates, and significant investment in infrastructure development and construction activity held the Queenstown property market at a cyclical high right through the Covid pandemic, peaking in late 2021/early 2022.
Since then, there has been a consistent decline in sales volumes in both residential and commercial property. Despite this, prices have remained reasonably stable, bucking the national trend of value reductions and displaying weak growth in most segments of the residential market. A lack of upcoming supply of entry level residential sections in the short term is expected to fuel further value increases. The first home/lower value end of the residential market is the strongest, while luxury/ lifestyle property has stagnated. Although residential rents have dropped in the face of reduced demand and increased supply, home and income properties are still displaying value increases. Commercial property values are holding steady, with relatively few sales in 2024, as owners wait out the current uncertainty.
Residential Build Costs
According to the Cordell Construction Cost Index, residential build costs declined for the first time in 12 years in the June 2024 quarter (down 1.1%). However, construction costs remain very high and are a significant challenge facing the market. Any continued reduction in build costs may prompt a new wave of construction activity, although residential construction remains hampered by a lack of available sections and financing constraints.
Changes to Overseas Investment Office Regime
The Government’s 2024 directive to the Overseas Investment Office (OIO) indicates a clear shift in policy towards encouraging overseas investment through streamlining application consultation and reducing processing timeframes. An increase in the OIO threshold value level would be welcomed in the local market and could foster growth in highend property values.
KEY MARKET DRIVERS
Domestic migration to Queenstown has anecdotally slowed, but remains positive and a strong economic driver
Underway and planned infrastructure projects further supporting local economy
Residential build costs are down, although construction costs remain high on historic measures
High-end property stagnating; an increase to OIO threshold could increase sales activity in this market segment
Buyer numbers in commercial market significantly reduced
Rates and insurance increases challenging property investors across all sectors
Queenstown Commercial and Infrastructure Development
Infrastructure development in the Queenstown Lakes District has been a contentious issue for many years, with existing infrastructure struggling to meet current and projected requirements. At the same time, rates increases in the district are signalled at an average of 15.6% for 2025, as Queenstown Lakes District Council (QLDC) manages increasing costs and debt levels. By 2030, QLDC estimated debt per household will be $50,000, compared with Auckland City at $38,048, and Central Otago at $7,779. QLDC’s proposed plan is to significantly increase debt from the current level of $640M to $1B by 2030.
Many projects are currently underway, with significant roading and Three Waters projects ongoing in the district - colloquially earning Queenstown the nickname ‘Conestown’. These projects are helping to provide employment security and contribute to the local economy.
“Water Done Well”
The National Government recently introduced a water reform policy, effectively replacing the previous government’s Three Waters model (wastewater, water supply and stormwater). QLDC’s 2024 10-year plan allocates $936.46M in the Queenstown area and $1.47B across the district to this infrastructure subsector.
State Highway 6/6A Intersection
The New Zealand Transport Agency Waka Kotahi commenced work in mid-2024 on the major intersection known locally as the ‘BP roundabout’ and connecting roads. Currently, this is a confined corridor with several connecting roads and over 40,000 vehicle movements per day. The project is expected to take four years to complete and will cost an estimated $250M.
Lakeview Taumata Project
This ambitious project, reported to cost around $2B, will transform the 10-hectare former campground site into a high-end, mixed-use precinct. It will include apartments accommodating up to 1,500 residents, three hotels, co-living and co-working spaces, health and wellness facilities, retail spaces, an art gallery and various food and beverage offerings. Construction is planned to take more than 10 years and will be divided into seven stages.
Queenstown Airport Master Plan
The Queenstown Airport Master Plan outlines a strategic framework for infrastructure development over the next decade, aligning with the airport’s 10-year Strategic Plan, which sets out projected growth of the airport from 2.4M passengers in 2023 to 3.2M passenger movements in 2032. Endorsed in December 2023, the plan focuses on modernising the terminal with a 3,000sqm addition, improving passenger flow and land transport connections, relocating general aviation activities, constructing a parallel taxiway, and enhancing runway safety with new technology.
Projected Approximate Value of Upcoming Projects
QUEENSTOWN COMMERCIAL & INFRASTRUCTURE DEVELOPMENT
2024
$355M
2025 $373M 2026 $1.02B
Source: Colliers Queenstown
Queenstown Residential Market
Like most centres around New Zealand, the Queenstown residential market has felt the effects of sustained high interest rates and restricted household spending. There has been an increased supply of homes for sale, with listings taking longer to sell, and sales volumes have reduced by around 40% from the 2021 market peak. So far, 2024 has seen a softening and slowing phase in the market, resulting in dynamics shifting in favour of buyers. However, displaying its trademark resilience, Queenstown has bucked the national trend of value reductions and has instead displayed continued, albeit weak, value growth across the residential market. The region continues to deliver consistent and solid capital gains in most market segments.
Established suburbs like Lake Hayes Estate and Arrowtown continue to have low inventory for sale, with high demand. In contrast, there has been a high number of listings in newer subdivisions such as Hanley’s Farm in 2024, perhaps indicative of a greater proportion of highly leveraged vendors in these suburbs. Following the reduction in the bright-line test on 1 July (making property sale profits taxable if sold within two years of
purchase, instead of five or 10 years), there has been an increase in both appraisals and listings.
First home buyers have been the dominant market participants so far in 2024. A townhouse development boom is underway as developers look to meet this demand, with multiple new subdivisions offering two to four-bedroom, terraced and semi-detached townhouses in the sub-$1M price bracket. In contrast, there is very little land currently available in the entry level price range, following the release of the final stage in the Hanley’s Farm subdivision at the end of 2023. High-value lifestyle sections are more abundant but have been slow to sell so far in 2024.
More recently, interest rate optimism is lifting market sentiment. However, with real wages still around 20% lower than in 2022, even if more affordability returns to the housing market, buyers will still be challenged until wage growth catches up.
Construction cost increases peaked in early 2024 and appear to be declining into the latter part of the year.
Source: Colliers Otago
TRENDS AND PROJECTIONS
rate
Buyers’ market continuing into the second half of 2024 as more properties are listed and the supply/ demand imbalance clears
Many homeowners are under pressure to sell, although banks are managing and limiting mortgagee sales
Queenstown Section & Dwelling Sale Prices & Volume
28 Headley Drive, Shotover Country
5 McDonnell Road, Arrowtown
A 1990s-constructed, four-bedroom, two-bathroom, singlelevel, standalone home with a second living area converted from the single garage. The 150sqm dwelling is located on a 564sqm section.
SOLD DEC ‘21
$1,340,000
SOLD JUL ‘24 $1,665,000
ANNUALISED GROWTH 8.77%
A 2019-constructed, two-level, four-bedroom, two-bathroom, modern dwelling with an attached, two-bedroom, onebathroom, self-contained unit. The 189sqm dwelling is located on a 432sqm section.
SOLD MAY ‘20
$1,089,000
SOLD JUL ‘24 $1,560,000
ANNUALISED GROWTH 9.00%
Average Weekly Residential Rent Levels
Queenstown vs. New Zealand
QUEENSTOWN LAKES DISTRICT NEW ZEALAND
Source: infometrics.co.nz
Shortage of sections available for those wishing to build following final releases of sections in the large subdivisions
Finite supply of land resulting in increased numbers of higher-density townhouse projects planned and underway
Rental Property Market
Following years of stock shortages and high rents challenging both long-term and seasonal renters, the dynamics of the Queenstown rental property market have eased in favour of tenants. Several factors have contributed to this, including rents reaching an unpalatable level, a poor start to the 2024 ski season deterring seasonal workers, and negative media coverage about sky-high rents deterring renters in general from moving to Queenstown. In tandem, a number of former backpacker premises have been converted into staff accommodation. This has had a flow-on effect on the local investment market, with the softer rental market affecting buyer confidence and potentially contributing to the overall slowdown in residential property sales, particularly those of home and income properties.
Section supply constraints will lead to rising land values and a greater proportion of renovations as opposed to new build projects
Lifestyle Market
Transaction volumes in the Queenstown lifestyle market have slowed, but sale prices remain stable or increasing. Listing volumes have increased 32% for dwellings compared with the same period last year.
Lifestyle section sales volumes in 2022 and 2023 were the lowest since 1997; however, the median sale price jumped up 30% between 2022 and 2023, from $1.5M to $1.95M. The section sales market has been challenging during 2024 due to the relatively high costs of construction persisting, as well as high interest rates. As construction costs stabilise and hopefully decrease, sales volume may increase in response.
In late 2023, the Environment Court ruled that the Whakatipu Basin Rural Amenity Zone is exempt from the National Policy Statement for Highly Productive Land (NPS-HPL), which was restricting supply while land earmarked for proposed subdivisions was assessed for soil productivity. A number of subdivisions in this zone and, in particular, the Lifestyle Precinct Sub-Zone are expected to proceed following this change, resulting in increased supply of lifestyle sites.
Change to Bright-Line Test
The National Government’s reduction of the bright-line test period to two years from 1 July 2024 seems to have had a minimal impact on the Queenstown residential market. Agents reported a small lift in listing volumes immediately following the change taking effect; however, the prevailing ‘buyer’s market’ dynamic has remained unchanged in late 2024.
High-End Property Sales
Historically, our reports have focused on sales occurring in the Whakatipu Basin at a threshold of over $3M. However, due to the increasing number of transactions over $3M, we are now shifting our focus to report on the number and value of sales exceeding $5M. This adjustment aims to better represent the high-end segment of the market.
Subdivisions
A large influx of section supply has entered the Queenstown market over the past five years, particularly with the sell down of Hanley’s Farm, which totals approximately 1,700 sections, sold in multiple ‘releases’ (21 release groups brought to market as at early September 2024). Higher-end subdivisions such as Koko Ridge, Kawarau Park and Peninsula Hill continue to add section supply to the medium to high value end of the market.
Several subdivisions are in planning/early development stages. Consent processes and infrastructure and construction costs may delay some of these projects, or prevent them coming to the market altogether. The following list details most of the more significant projects currently planned and underway in Queenstown. Other than those listed below, further subdivisions in the entry to mid-range price bracket are unlikely in the short-term.
Subdivisions planned and underway in Queenstown include:
• Silver Creek: a 33.7ha site at the top of Goldfield Heights. Consented for 580 sections, from large, highend sites to smaller sections, the development will be released in 15 stages expected to take up to 10 years. Earthworks are expected to commence pending council consent. Sections and house and land packages in the initial three stages are on offer, with one stage sold out as at late 2024. Townhouses, apartments, a workers’ accommodation village and a reserve are also planned.
• Waipuna Rise: part of Frankton North, a new 27ha urban area approved in 2024 on the north side of FranktonLadies Mile Highway. 20 hectares are zoned for highdensity residential, with up to 1,000 apartment, duplex and terraced units. Office and/or retail development is also planned.
• Arthurs Point Woods: around 55 cabin-style homes on 300-400sqm lots in a native reforestation block above Arthurs Point village.
• Hayes Creek: a consented 20-site subdivision with lifestyle blocks of 5,000-15,000sqm off Alec Robins Road. Earthworks have commenced.
• Bullenrise: a consented 29-lot medium density subdivision adjoining the recently developed Bullendale subdivision in Arthurs Point. Over 30 lots are proposed, including larger sites intended for multi-unit developments of two to 12 homes. A Queenstown Lakes Community Housing Trust component is also included. 12 sites are set aside for single homes.
• The Paddocks and Frogmore Lane: developed by Woodlot Properties, The Paddocks is a six-lot rural lifestyle subdivision located on Littles Road, Dalefield. Frogmore Lane contains a further five large sites. Earthworks are complete and titles have been issued on The Paddocks, with titles in Frogmore Lane expected in October 2024.
• Koko Ridge: a lifestyle subdivision adjoining Shotover Country offering 37 lots between 2,000sqm and 4,230sqm. Infrastructure is complete, with around half of the lots sold as at September 2024.
• Peninsula Hill: a mixed-use development in multiple stages on the Kelvin Peninsula including single-home sites, a medium-density residential zone and local shops. Most lots in the first release were sold as at late 2024.
• Homestead Bay: a 163.5ha site adjoining the south side of the Jack’s Point development. Marketed as the last lakefront development of its kind in Queenstown, it includes consented plans for lifestyle blocks, freehold homes and apartments, as well as a village centre and marina. Developer RCL (which recently completed Hanley’s Farm) is planning between 1,700 and 2,300 residential sites over the next 10 years, subject to District Plan change and relevant consents.
• Park Ridge: formerly known as the Coneburn residential development, this proposed subdivision on the north side of Hanley’s Farm gained fast-tracked resource consent. Infrastructure works are underway for up to 650 lots. This list does not include residential developments/house and land packages such as Te Pa Tahuna on Gorge Road, Tewa Banks in Jack’s Point, Kawarau Heights and Jade Lake in Fernhill.
Developments in the wider Whakatipu Basin area include:
• Kingston Village: a 750-site development south of Kingston township which will approximately double the size of the existing town. 217 sites are consented on 20ha of land within stage one. Significant infrastructure development works are also underway.
• Gibbston Valley Resort: a three-stage luxury resort development including the Gibbston Valley Winery and Lodge. Earthworks are underway for stage one, which includes 33 ‘house and land’ and freehold sections in The Reserve. Stage one also includes a nine-hole golf course and club house, and a further 10 large freehold sections in The Rockery.
• Alfred’s Terrace: a 54-site subdivision adjacent to Glenorchy village, priced at around $300,000 to $435,000 for sites between 800sqm and 1,250sqm. Only a few sites were still available as at late 2024. Earthworks are nearing completion.
Te Pūtahi Ladies Mile Plan Variation
There is a proposal to introduce a new Special Purposes Zone in the Proposed District Plan for around 120ha of land along State Highway 6 between the Shotover River and Lake Hayes. This would facilitate progress on the Ladies Mile Masterplan, which was approved by QLDC in June 2022 and allows for 2,400 homes across a mix of high, medium and low density developments, as well as local shops, schools and sports/community amenities.
Queenstown Commercial Market
Queenstown CBD Commercial Market
Prime retail property in the Queenstown CBD continues to perform strongly. The completion of town centre upgrades to improve traffic flows, pedestrian areas and streetscapes has led to rental increases and a shift towards a higher-end collection of retail offerings. This transformation is evident in the prime retail areas, where there is nil vacancy and an influx of prestigious brands, enhancing the shopping experience for tourists and cementing Queenstown’s status as an international resort destination.
Vacancies in retail spaces are being backfilled in many cases by higher-end brands. For example, Hallensteins’ move to Frankton will see the entry to Queenstown of global cosmetics chain Mecca. Other vacancies are arising through tenant movements, for example Mountain Warehouse moving to a bigger site. However, rents on new leases are not always equalling the high levels set in 2023, both in the prime retail and hospitality sectors. Secondary and fringe retail areas appear to have stagnating rents as affordability ceilings are reached. Rents may strengthen again as tourism numbers and spending levels continue to recover.
The CBD office market is soft, with 7% vacancy across 10 tenancies at early September 2024. Long-term gripes around car parking availability in the CBD are dissipating, with the Boundary Street Car Park having reopened and with Frankton car parking becoming more difficult to access and increasing in cost.
CBD Commercial Market Key Indicators
Overall occupancy costs present a challenge for tenants across all sectors, fuelled by escalating insurance premiums and proposed council rates increases.
Investment property continues to be tightly held, with a handful of transactions in the past 12 months. Yields remain sharp at less than 4.25% in the prime area and 4-5% in the town centre fringe.
New development activity in the town centre is subdued, with the mid-2024 completed building at 5-7 Beach Street (pictured below), opposite the Beach Street entrance to O’Connells Mall (which underwent a significant reconfiguration and modernisation, completed in late 2022), being the first newly constructed building in the Queenstown CBD since 2016.
Source: Colliers Otago
TRENDS AND PROJECTIONS
Frankton Commercial Market
The office and retail sectors in Frankton have reached a maturing stage, with most spaces occupied. Office space is near capacity, particularly in new A-grade buildings. This indicates a strong preference among Queenstown locals for working and shopping in Frankton rather than in the town centre. The trend is further reinforced by the construction of additional hospitality premises in the Queenstown Central development in Frankton, which is expected to solidify this shift.
Despite the increase in occupancy and development activity, rental growth in the Frankton office and retail precinct has been relatively subdued over the past two to three years. The rapid increase in land and construction costs could constrain further development, unless rental levels rise to a point where they make new projects financially viable.
Frankton Commercial Market Key Indicators
54 Shotover Street, Queenstown
A two-level building located in a secondary retailing area. Recessed entrance with a large, curved staircase to the upper level. No lift access. Purchased by an adjoining landowner. Strong redevelopment potential.
Suburban Commercial Market
The development of new subdivisions around Queenstown has led to growing urban sprawl and increased travel time constraints. As a result, there has been a notable rise in suburban retail, particularly in the hospitality and convenience sectors, which are thriving in larger, established suburbs.
This growth is likely influenced by QLDC’s efforts to manage urban expansion through the proposed Urban Intensification Variation. The proposed changes are designed to align with the National Policy Statement on Urban Development (NPS-UD), which emphasises creating well-functioning urban environments that meet diverse community needs. The variation seeks to provide a greater variety of housing options near public services, reduce greenfield expansion, and create more compact urban forms to reduce travel needs and emissions.
Source: Colliers Otago
Queenstown Industrial Market
The Frankton industrial property market is back to virtually nil vacancy and the sector is performing well under strong demand. A number of industrial tenants and investors are searching for property in Frankton and coming up against limited availability of space to lease or purchase. A shortage of available industrial land has driven an increase in land values, while a challenging development environment is restricting the addition of new stock. .
Few premises have been marketed for lease throughout 2023 and into 2024, with scarcity having been a critical factor in driving rents higher amid increased competition among tenants. Prevailing market dynamics have changed relatively little in the short term, with tenant demand exceeding supply and significant growth in rents. However, rents are now reaching a level where tenants are expected to start resisting further increases, especially with the operational cost pressures businesses are facing. New leases are still typically seeking, and often obtaining, market-leading direct rates where tenants are motivated and have sufficient financial resources. Smaller, more affordable industrial premises have become scarce as the entry price point into Frankton has lifted and affordability for small businesses has diminished. A challenging macroeconomic environment is also likely prompting a more conservative tenant outlook.
45 Brookes Road, Frankton
A 2,325sqm, regular-shaped, industrial zoned site located within the Frankton Flats industrial area.
SOLD OCT ‘17
SOLD APR ‘24
$2,500,000 ($1,075/SQM)
$4,250,000 ($1,828/SQM)
ANNUALISED GROWTH 8.50%
Industrial Market Key Indicators
Queenstown Industrial - Gorge Road Corridor
The Gorge Road corridor has demonstrated a reasonably stable dynamic overall and continues to be a less preferred location for industrial users compared with Frankton. There is lower tenant demand for property in this area, which is characterised by a number of well-established businesses and reasonably high occupancy, with a limited turnover of premises. Growth in the Gorge Road precinct lags that of the Frankton industrial precinct by a reasonable margin, with businesses in the area often favouring the proximity to customers in the Queenstown town centre.
Queenstown Tourism Market
TRENDS AND PROJECTIONS
Vacancy levels to remain low with continued pressure on industrial rents, although rents may be approaching an affordability ceiling
Yields expected to consolidate
Release of land on the south side of Queenstown Airport will be able to accommodate a handful of user groups only, due to restrictive covenants
Development of new industrial stock will remain challenging, with high land prices and regional construction costs
The increase in recoverable operating expenses borne by tenants (rates and insurance premiums) will exceed CPI levels
The Queenstown tourism market is in the maturing stages of the post-Covid recovery and growth cycle. International visitor numbers are increasing, with Queenstown Airport reporting 95,894 international passenger movements in July 2024. This is an 11.75% increase on the previous year. However, subdued economic conditions worldwide have dampened the recovery of international tourism, and visitor spend is subdued.
Domestic travel within New Zealand is experiencing similar constraints. Ongoing high costs of living and pressure on household budgets have resulted in reduced discretionary spending. As a consequence, many New Zealanders are cutting back on non-essential expenses, including domestic travel and leisure activities. This is reflected in Queenstown tourism expenditure, which for the year ended June 2024 was approximately $2.729B – down 6.6% on the same period last year. By comparison, tourism spending in New Zealand as a whole was up 1.8%.
The tourism sector remains a crucial component of Queenstown’s economy, employing 11,919 people in 2023 - accounting for 37.5% of the district’s total employment. Employment in the tourism sector has shown remarkable growth in the recovery phase, increasing by 49.7% in 2023 compared with the previous year. This demonstrates the strength of Queenstown’s tourism sector in the face of challenging economic conditions.
1 Gorge Road, Queenstown
A 12-unit motel sold at auction at lease end with vacant possession, including chattels, with several bids on the day. The property was sold to an existing accommodation operator.
SOLD JUNE ‘24 $5,150,000
Queenstown Lakes District Tourism Expenditure *Include
Wānaka Residential Market
The Wānaka property market remains active and has been fairly resilient to the challenging market conditions experienced in other parts of New Zealand. However, the local market has not been completely immune to current economic conditions. Buyers are now more cautious and are taking a conservative approach. Despite this subdued mood, there were more residential dwelling sales in Wānaka in the first six months of 2024 compared with the same period in 2023.
The mid-range sector of the market has continued to transact, although activity has been slower. While properties with realistic pricing are generating reasonable interest and selling well, several properties in this sector of the market have taken longer to sell in recent months. This is partly due to fewer purchasers being currently active in this price range.
Section Market
Land sales in Wānaka remain slow. Titles have been released in several new developments in 2024, accounting for the large volume of section sales during the year. However, it is worth noting that the majority of these sections were signed up in 2021 and 2022 in more favourable market conditions. There has only been a limited number of titled section sales in Wānaka outside of these developments between January and July 2024; however, there has been a positive uptake of sections in new developments, where titles are not expected to be issued until 2025.
Apartment 24, Marina Terrace, 65 Lakeside Road, Wānaka
Penthouse apartment located in the 44-unit Marina Terrace Apartments development which has a pool, spa and gym facilities. 184sqm floor area. Three bedrooms, two with ensuite bathrooms. Terrace with outdoor fire.
$3,500,000
$3,800,000
Wānaka Section & Dwelling Sale Prices & Volume
Entry Level Sector
Interest and activity in the entry level / lower value range sector of the market remains strong, with many compact houses on smaller size sections in Wānaka selling for prices similar to those being paid for properties in Lake Hawea. Recent examples are three sales in July 2024 in Matakanui Lane in the Northlake development. These properties are all single level houses of around 120 to 135 square metres with three bedrooms, two bathrooms, open plan kitchen/dining/living areas and single garages, on sections roughly 300 square metres in size. Sale prices were as follows:
2 Matakanui Lane – July 2024: $1,100,000
3 Matakanui Lane – July 2024: $1,120,000
5 Matakanui Lane – July 2024: $1,180,000
High-End Market
The Wānaka luxury property market has generally proven to be robust throughout the economic cycle, with high-end holiday home buyers from around the country generally less affected by current factors such as high interest rates.
The premium end of the Wānaka market remains the realm of highly discretionary homeowners, with premium properties generally taking a while to sell irrespective of market conditions. While interest in high value/luxury properties in Wānaka has still been fairly strong, transaction levels remain low. Just seven sales above $4M were concluded between January and July 2024, two of which were lifestyle properties. Potential purchasers have no sense of urgency and there is little competition from other buyers, as was the case in 2021 and 2022.
The highest price paid for a residential dwelling in Wānaka in 2024, to end of August, was $7.84M, well down from the previous record sale price in 2023 of $10M for a residential property on a 2ha block.
Rental Market
Following an extreme rental property shortage, the pressure on the market appears to have eased in 2024. Rental property listings are now increasing and rents appear to have stabilised following a period of rapid growth.
Median Market Rent Per Week, Six Months to 31 July 2024
Three-Bedroom House
Source: tenancy.govt.nz
Migration and Tourism Trends
Wānaka remains a desirable location to live and holiday in, with domestic migration and visitor numbers providing solid local economic drivers.
According to Statistics New Zealand, over the five years to 2023, population growth in Wānaka and surrounds averaged 4.5% per annum. In comparison, population growth across New Zealand for the same period was only 1.3% per annum.
The Ministry of Business, Innovation & Employment’s Accommodation Data Programme reported that the total number of guest nights spent in short-term accommodation for the Lake Wānaka tourism area in July 2024 was 53.4K, comprised of 31.4K domestic guest nights and 22K international guest nights.
TRENDS AND PROJECTIONS
Wānaka Commercial Market
Wānaka commercial property continues to be tightly held, with buyers looking for investment opportunities in the town centre facing a limited supply of stock. However, buyers are showing more caution and are taking the time to evaluate investment opportunities thoroughly. As an example, after an extended selling period (originally listed for sale in November 2021), the Mediterranean Market and McKenzie & Willis building at 6/22 Ardmore Street, on the periphery of Wānaka’s town centre, sold in August 2024.
Retail vacancy remains low and there is also minimal office vacancy in the town centre, with no new supply of retail and office space in the short term. The high cost of land and construction is continuing to challenge the viability of new developments in the town centre. Current rents are generally not at the level required to make new construction feasible.
Premises that are proactively managed and are aligned with market rates are expected to see minimal change in rentals in the short term.
Tenant demand has slowed over late 2023 and 2024, although we are still aware of potential tenants struggling to find well located premises in the town centre. Tenants wishing to enter the Wānaka market do have options in the Three Parks development, where new supply is ongoing at a steady rate.
Wānaka Commercial Market Key Indicators
Glendhu Golf Course Development
Construction of a championship golf course, at a reported cost of $80M, covering 100 hectares of lakefront land on Glendhu Station, along with the subdivision of 42 residential sections, is underway. Expected to open in 2025, after more than two decades of planning, the golf resort development will also include a restaurant, club house and 24 visitor accommodation rooms. Darby Partners (developers of The Hills and Jack’s Point courses in Queenstown) and Glendhu Station owners Bob and Pam McRae first gained consent for the project in 2008. It is expected to put Wānaka on the global golfing map and extend the world-class golf tourism offering of the Queenstown Lakes District.
70 Ardmore Street, Wānaka
A 1930s, 260sqm building with a heritage listed frontage. Situated on a 341sqm of site on the northern side of Ardmore Street. Off market transaction with the purchaser also having a part ownership interest in the current tenancy. Not considered to be reflective of market conditions.
Source: Colliers Otago
Wānaka Industrial Market
There is continued demand from investors for modern, high quality industrial property in Wānaka with long-term leases in place. However, the availability of stock is an ongoing issue due to the tightly held nature of the Wānaka market. Rentals in the Anderson Heights Business Park and Ballantyne Road industrial areas have continued to increase over late 2023 and 2024, although at a slower pace than the previous two years. Rents for existing premises are expected to stabilise going forward due to challenging economic conditions and tenant affordability ceilings being reached.
Industrial land values are between $800 and $1,000 per square metre, with mixed-use zoned land in Three Parks in the range of $1,300 to $1,450. There are very few vacant, titled, industrial sites currently available to purchase in Wānaka.
There is also a supply shortage of industrial facilities, with several planned developments requiring tenant commitment before construction can commence, particularly in Three Parks. Similar constraints in the commercial sector are evident, where viability of construction is an ongoing challenge. Rental growth is a positive driver for the sustainability of new development in the medium term, although it remains subdued.
Wānaka Industrial Market Key Indicators
7 Frederick Street, Wānaka
A 2004-built, industrial style premises comprising a showroom, offices, amenities and workshop. Large concrete yard, including parking space, with security fencing and gates. 430sqm gross floor area located on a 1,411sqm level site.
NOV ‘23 $1,810,000
Source: Colliers Otago
TRENDS AND PROJECTIONS
Strong demand from investors for industrial property, aligned with nationwide trends
Further rent growth will be subdued owing to economic and affordability challenges
Industrial land values softening, although mixed-use land in Three Parks is steady
Shortage of industrial premises, with new supply dependent on tenant pre-commitment
Cromwell Commercial & Industrial Market
Office / Retail Market
As more occupiers in the professional services sector establish a presence in Cromwell, there has been an associated rise in demand for commercial office space. We expect demand for office space will continue to grow over the next few years as more professional services businesses open in the town.
Some retail spaces in The Mall have been converted into offices, reducing the town’s retail capacity, but providing an alternative source of rental income for owners. Central Otago District Council’s town centre upgrade project is still in limbo.
One developer is well advanced with plans to construct a purpose-built office development, with the aim of completing the project by late 2025. The current high cost of construction means rents of at least $350 per square metre need to be achieved to make the development of new office space in Cromwell viable.
Industrial Market
Regular transactions of Cromwell industrial properties have continued throughout 2023 and into 2024, albeit at a low volume for improved properties. Much of the activity is occurring in the industrial land subdivisions on the north side of Cemetery Road. The issue of titles in these subdivisions has allowed previously contracted transactions to settle and a small number of construction projects to progress, typically by owner-occupiers. The anticipated release of further industrial land will be able to meet demand for the foreseeable future, and cement Cromwell as a regionally significant industrial precinct of scale.
Occupancy levels remain high, with the town acting as a regional hub. Occupiers based in Cromwell are able to service both Queenstown and Wānaka, while paying more competitive rents for their premises. While there has been upward pressure on rents, they are still falling short of levels required to prompt any significant new supply, despite the relative abundance of land. The development of new industrial stock is challenging, with regional construction costs and financing presenting barriers to development.
18 Venning Crescent
A level, rear-positioned industrial section of 2,646sqm with right-of-way/laneway access only. Net developable area of approx. 2,393sqm.
Increasing recognition of Cromwell as a regionally significant industrial precinct, especially for transport and logistics operators
Good supply of land available for the next five to eight years
Vacancy rates for industrial buildings to remain low, with construction costs staying high
Relative affordability of both land and rents appealing to owner-occupiers and tenants compared with Queenstown and Wānaka
Otago Gold Resurgence
Santana Minerals’ BendigoOphir Gold Project covers a 251-square-kilometre site, a 15-minute drive to the northeast of Cromwell. A scoping study projects gross revenue of $4.4B based on current gold prices. The project will take approximately 12 years and could commence as early as 2026, subject to resource consent being obtained through a fast-track process.
More trade businesses expected to relocate to Cromwell to benefit from lower rents
The nationally significant gold discovery at nearby Bendigo could spur further growth *apportioned
Central Otago Lifestyle, Horticulture & Viticulture Markets
Lifestyle Market
Sales activity in the Cromwell Basin has increased slightly. There were 13 sales of properties between one and 10 hectares between January and August 2024, compared with only 10 for the same period in 2023. The average sale price reduced from $1.8M in 2023 to $1.6M in 2024 (to the end of August), but this is distorted by the higher number of lower value section sales completed in 2024. The number of sales above $2M remained stable, with three sales to the end of August 2024, compared with four sales during the same period in 2023.
Viticulture Market
There is currently a high level of enquiry for lifestyle vineyards, as people seek alternative sources of income to soften the impact of high interest payments. Enquiry levels have also been boosted by people wanting to relocate to Central Otago, who look to vineyards and orchards as an alternative when they cannot find a simple lifestyle block available to purchase. Although enquiry levels have been high, vineyard sales have been very subdued, with only three sales completed for the first eight months of 2024, largely due to the fact that buyers do not want to take the next step of owning a vineyard or orchard, despite the lifestyle aspect that these types of properties provide.
Horticulture Market
Smaller orchards with older-style planting tend to remain on the market for lengthy periods, despite strong levels of enquiry from lifestyle buyers. A property sold in August 2024 at Queensberry, which included a house and reduced area of cherry trees that had been on the market for an extended time (over three years). Its value was essentially attributed to its lifestyle aspect, as opposed to the orchard.
Defiance Vineyard, 263 Felton Road, Bannockburn
10.1919ha with a cellar door. 7.4ha planted in 5 varieties. A strong sale, reflecting premium value for Bannockburn property. SOLD AUG ‘24
TRENDS AND PROJECTIONS
Properties with a blue chip location for either lifestyle, viticulture or cherries will continue to attract strong interest and achieve high values
Prices for older horticulture properties expected to remain around 40% below pre-Covid levels
$3,800,000
Increase in sales activity within the horticulture sector as growers have made their way out of the postCovid years and challenges
Vineyard sales will remain slow given the current issues (21% drop in export shipments from NZ; however; this has been caused by wine destocking, rather than lower demand for NZ wine)
Dunedin Residential Market
Values in the Dunedin residential property market have overall remained fairly steady through 2023 and into mid2024. Since the cyclical price peak of late 2021 and early 2022, the number of active buyers has decreased, and demand has weakened. Some confidence appeared to return to the market in late 2023; however, buyers in general are still showing some caution. This appears largely due to interest rate levels remaining high and economic concerns nationally, including the timing of expected interest rate cuts.
Despite the continuing subdued market climate, buyer demand still exists across most value ranges in Dunedin. Well-presented and well-located properties remain sought after and are selling. However, some deals are proving more difficult to get ‘over the line’, perhaps owing to a combination of fairly tight lending conditions and the absence of ‘FOMO’ among purchasers.
First home buyers are active within the market, with property in the low to mid-value ranges appearing most in demand despite the economic environment. Anecdotally, properties
in the higher value ranges are generally taking longer to sell, with a higher degree of caution prevailing in that sector of the market. The market for vacant sections also remains quite flat, with high building costs being a major factor in purchasing decisions.
Developers are still fairly active, with new townhouse projects continuing to be an area of focus across the city. Developments range in price points from social housing to higher end, executive housing. While the sales volumes within this sector have dropped, interest remains and properties continue to transact.
The student investment market remains slower than previous years, with some buyers and vendors in this market particularly susceptible to changes in Government legislation and rising ownership costs. However, as with the owner-occupier market, demand does exist and, as at early September 2024, buyer interest appears to be increasing and properties are transacting. Gross yields are generally within the low to high 6% range for sales of well-located single dwellings.
Section & Dwelling Sale Prices & Volume
TRENDS AND PROJECTIONS
Large scale capital projects underway in the health and education sectors, continuing over the next 5-10 years, are helping to maintain or strengthen the local economy
and sales volumes holding fairly steady, although properties are
Buyer caution persisting in the residential market until clarity emerges around interest rate cuts
First home buyers active with good demand in the
to mid-value ranges
Dunedin
Dunedin Commercial Market
Retail Property
An influx of national and international occupiers into the Dunedin retail market is positive for the local economy; however, many retailers are still reporting reduced trading levels. The Meridian centre on George Street has welcomed three anchor tenancies: Les Mills, which has shifted from Dowling Street; Chemist Warehouse (a new entrant to the Dunedin market) and Kathmandu, which has relocated from its longstanding site on the corner of Great King Street and Albion Lane. The ex-Kathmandu site has been re-let to national retail chain Backdoor.
George Street has also seen some uptake of vacant retail space recently, with leases secured to new national and international retailers entering the Dunedin market. These include Seed Heritage, Mecca and Repertoire. This uptake, along with the now-complete George Street infrastructure and spatial upgrades, contributes to a positive outlook for the central Dunedin retail precinct. An uplift in retail spending would inject further life into the precinct, benefiting retail and hospitality businesses, some of which are feeling the reduction in consumer spending acutely.
According to the Property Institute of New Zealand’s annual pedestrian count survey, George Street remains the top retail location in terms of foot traffic, with seven of the top 10 pedestrian count locations being located on George Street in the 2024 survey results (see chart below).
64 Hillside Road, South Dunedin
Source: Property Institute of New Zealand
Dunedin’s bulk retail market remains strong, with Kmart recently opening its doors in the redeveloped ex-Smiths City building on Andersons Bay Road. Tenant demand in this sector is still high; however, a lack of vacant space and available development land is preventing several bulk retail tenants from either entering the market or relocating to new premises. Opportunities are restricted by geographical constraints, the leasehold nature of a large portion of sites in South Dunedin, and tight zoning rules which are very protective of the CBD.
TRENDS AND PROJECTIONS
retailers
Strong tenant demand for large format space, with a lack of premises and land restricting opportunities
Bulk retail premises situated on the corner of Hillside Road and Andersons Bay Road. Freehold (and part leasehold) tenure. The 9,478sqm building was purposebuilt in 2002 for The Warehouse. Land area of 23,683sqm. Purchased by a local investor. Approximately three years until right of renewal. SOLD MAR ‘24 $16,150,000
CBD retail rents stabilising following a period of strong increases
Dunedin City Top 10 Foot Traffic Locations
Retail Spending and
Tourism
Consumers are still feeling the effects of high inflation and high mortgage rates, putting pressure on discretionary spending. According to Dunedin City Council’s economic updates produced by Infometrics, annual retail spending in Dunedin increased by 3.2%, coming in below inflation and population growth rates and resulting in a 0.4% decrease in Dunedin’s GDP for the year ending March 2024. Tourism spending had increased in line with the New Zealand average, with the continued demand for international travel globally and the return of cruise ships over the past 24 months contributing to this.
Dunedin Retail Market Key Indicators
Source: Colliers Otago
Office Property
Office rentals within the CBD have started to plateau. This follows some notable increases over the past five years, following a heated market with limited supply. This dynamic was exacerbated by a number of properties taken under the Public Works Act to facilitate the new hospital development. Looking forward, completion of the new ACC/Ngai Tahu joint venture development, the Otago Regional Council headquarters building and the new Pacific Radiology building on Great King Street is expected to open up a large amount of office floor space throughout the city as these tenancies consolidate into their respective new premises.
We are continuing to see tenants prepared to pay higher rates for prime office stock, either in new developments or refurbished heritage buildings with high quality internal fitouts, and/or good associated car parks. We note that gross rentals for new buildings within the CBD are now sitting above $500 per square metre for a bare shell.
Dunedin Office Market Key Indicators
Source: Colliers Otago
Car Parking Woes
Car parking in the city centre has been a hot topic for many years. Some inner-city carparks have been purchased for large projects including the hospital, ACC/Ngāi Tahu joint venture and the Otago Regional Council headquarters. This reduced supply has seen parking rates consistently rise over the past five years. Centrally located car parks now typically cost around $50 to $60 per week excluding GST.
Other than the two levels of parking to be included within the new Pacific Radiology building, there do not appear to be any Council plans to ease the strain on car parking. This creates very high demand for existing parking, with new tenants also looking for central city space, with car parks either on site or close by. The Meridian Mall car park is a key beneficiary.
Dunedin Industrial Market
Prime central and South Dunedin industrial space remains scarce, increasing the demand for secondary grade or less well located industrial properties along Kaikorai Valley Road and over the hill in North Taieri, especially off Dukes Road North. The limited supply of industrial land in Dunedin, along with the high cost of bringing new developments to the market, has resulted in the rate of new construction slowing over the past 12 to 18 months.
Notable new industrial construction projects in Dunedin include the Bascik Transport warehouse along Burns Street and Tuapeka Gold in Fairfield, both being developed by owner-occupiers.
The shortage of available industrial development sites is unlikely to ease in the near future due to geographical constraints and a shortage of freehold land. Rents have been increasing across the market in response to high demand and supply constraints. There are limited opportunities for tenants to secure new premises or to enter the Dunedin market, especially in prime, purpose-built facilities. Investor demand remains consistent, especially for prime freehold industrial properties with strong tenant covenants. However, yields have softened from their 2021 and 2022 levels.
3 White Street, Dunedin Central
Modern, 750sqm industrial warehouse building located on a 2,386sqm site within the central Dunedin harbourside area. Freehold tenure. Purchased by an owner-occupier.
SOLD MAR ‘24 $2,600,000 EQUIVALENT
TRENDS AND PROJECTIONS
Scarcity
Geographical constraints restricting further industrial development in central locations Consistent
Strong rent growth recorded over 2023 and 2024 due to high demand and restricted supply
Dunedin Industrial Market Key Indicators
Source: Colliers Otago
Colliers Otago
About Us
Colliers Otago offers a broad range of specialist property services, with a knowledge-driven approach and global reach. Our combined team of experts provides clients with arguably the largest and most experienced group of property professionals in the region, with offices in Queenstown, Wānaka, Cromwell and Dunedin.
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DUNEDIN
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Meet Our Team
Valuation & Advisory Team
Heather Beard
Director
Registered Valuer / Consultant
Queenstown
Joe Chapman
Registered Valuer / Consultant Dunedin
Tom Jarrold
Director
Registered Valuer / Consultant Wānaka
Laurette Young Valuer Wānaka
Matthew Crowther
Registered Valuer / Consultant
Queenstown
Duncan Jack
Registered Valuer / Consultant Dunedin
Jodi Todd
Valuation Practice Manager Wānaka
Lynette Bailey Valuer Wānaka
Lisa Pond
Registered Valuer / Consultant
Queenstown
Kayla James Valuer
Dunedin
Tim Welsh
Registered Valuer / Consultant Wānaka
Cara McMeeken
Valuations Team Leader
Queenstown
Commercial Team
Mark Simpson
Director
Commercial Broker
Queenstown
James Valentine
Commercial Broker
Queenstown
Rory O’Donnell
Commercial Broker
Queenstown
Dean Collins
Director
Commercial Broker
Dunedin
Alastair Wood
Commercial Broker
Queenstown
Sharee Aitken
Commercial Broker
Queenstown
Tim Thomas
Commercial Broker
Queenstown
Tyler Dickison
Commercial Broker Dunedin
Barry Robertson
Commercial Broker
Queenstown
Mary-Jo Hudson
Commercial Broker
Queenstown
Steve McIsaac
Commercial Broker
Queenstown
Geoff McIrea
Commercial Broker
Wānaka
Residential Team
Fred Bramwell Director Sales Consultant Queenstown
Brendan Quill Sales Consultant Queenstown
Doug Reid Sales Consultant Queenstown
Hugh Clark Sales Consultant Queenstown
Maria Wyndham Sales Consultant Queenstown
Poppy Jefferies Sales Consultant Queenstown
Vera Stewart Sales Consultant Queenstown
Craig Myles Director Sales Consultant Wānaka
Raylene McQueen Business Manager Queenstown
Candice Buchanan Sales Consultant Queenstown
Emma Lups Sales Consultant Queenstown
James O’Hagan Sales Consultant Queenstown
Mei Chen Sales Consultant Queenstown
Richie Heap Sales Consultant Queenstown
Vicky Tomich Sales Consultant Queenstown
Debbie Forrest Sales Consultant Wānaka
Anna Wang Sales Consultant Queenstown
Damien Henaghan Sales Consultant Queenstown
Eoin Miles Sales Consultant Queenstown
Jesse Johnston Sales Consultant Queenstown
Nicole Bell Sales Consultant Queenstown
Stephen Hebbend Sales Consultant Queenstown
Zach Hylton Sales Consultant Queenstown
Roger Ellis Sales Consultant Wānaka
Rural & Lifestyle Team
Ruth Hodges Director Rural Sales Advisor Otago / Southland
Helen Flintoff Rural Sales Advisor Otago
Mike Eyles Rural Sales Advisor Otago / Southland
Wes Flannery Rural Sales Advisor Otago
Mark Wilson Rural Sales Advisor Otago / Southland
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Queenstown Wānaka
Dunedin
Cromwell