2021/22
Market Review & Outlook
Queenstown, Wānaka, Cromwell & Dunedin
QUEENSTOWN
Overview 04
Residential 07
Lifestyle 10
Rental Market 13
Commercial 14
Industrial 17
Tourism & Hotel Market 18
Steamer Wharf, Queenstown CBD
Commercial & Industrial 24 Cardrona 25
OUEENSTOWN
Despite predictions of a market downturn in 2021, all evidence would suggest that the Queenstown property market has weathered the storm of the past 18 months and continues to see value appreciation across most market sectors.
A significant downturn was predicted in the wake of border closures in the area’s tourism-driven economy, but the current market is showing itself to be resilient with property sales figures surpassing pre-pandemic levels. This could be due to the maturation of the area, with several years of strong population and business growth in the region.
Queenstown property has seen further demand with the return of ex-pat New Zealanders looking for a base or a bolt-hole in their home country. This combines with relocation from cities to the regions for people seeking an improved lifestyle, as flexible working arrangements become more mainstream and technology makes this more accessible.
Commercial and industrial investors appear to be making purchases with the expectation that border closures will soon be a thing of the past and the tourism market will make a strong return. Projected visitor and population figures from the Queenstown Lakes District Council through to 2051 support this assumption.
Over the past year, during the brief period of the bubble with Australia, Queenstown was popular with domestic travelers and Australian visitors, providing much needed cashflow in the tourism sector, albeit at lower levels than seen in the lead up to the pandemic. All in all, it would appear that the threat to Queenstown’s property market has largely been avoided during this tumultuous time. However, we note that the ongoing threat of lockdowns will impact business viability in the short to medium term, which could have negative ramifications for the commercial property market.
Overall Trends & Predictions
Ongoing government policy on border closures and vaccination requirements will have a strong impact on business recovery
Regions
seeing growth as Tourism Infrastructure Fund boosts regional economy
Reserve Bank introducing new tools to restrict lending criteria
Economists project an increase in mortgage rates across the next 12-18 months
Residential listing volumes at lowest seen in 14 years couples with strong demand, driving value appreciation
Downward pressure on capitalisation rates in commercial and industrial sector as investor demand increases for a limited supply of properties
NZ population redistributes to regions
DRIVE FOR INVESTMENT RETURN
Despite reduced returns in rental housing and commercial properties, investors are taking a longterm view. Residential rental rates have started to recover since they dropped approximately 20% following the 2020 Covid lockdown. Rental properties, which were rapidly removed from short-term accommodation stock and placed into longer term tenancies, have in some cases returned to the short-term market, though in limited numbers with the threat of further lockdowns still prevalent.
An increasing number of buyers are moving towards commercial rather than residential properties, with recent government policies around residential investment combined with financial implications for investors touted as likely reasons for the trend. Activity remains bolstered in residential new builds, with strong demand evident. Building material supply and labour constraints will continue to add to new build costs. Institutional and high net worth investors are also seeking out property investment due to strong returns and potential for capital growth.
INFLATION RISK TO MORTGAGE HOLDERS
The Official Cash Rate (OCR) is set by the Reserve Bank of New Zealand and has a significant influence on bank mortgage rates. 2021 saw a ten-year record high of 4.9% inflation in the September quarter, putting pressure on the Reserve Bank to curb inflationary pressure in the economy. OCR increases are a key tool in this process, adding risk to mortgage holders. Some economists are predicting the OCR could rise to 2% by the end of 2022. When the OCR was last at this level in 2016/2017, an average twoyear fixed mortgage rate was 5-6%. We therefore expect a trend of increasing mortgage rates in the short to medium term, which could put pressure on highly-leveraged property owners.
PROPERTY VALUE & OFFICIAL CASH RATE CORRELATION
Source: RBNZ.govt.nz & Colliers
Residential
Predictions around a downturn in the residential market have proved off the mark, with sales volumes and values both reaching high levels.
Townhouses, apartments and terraced homes in particular have seen growth in 2021. This is potentially due to government policies around tenant rights and rental increases, causing some to buy into the short-term rental market for greater returns. This is an about-face on last year, where many short-term rentals were being converted to longer term.
Higher density residential neighbourhoods continue to see value appreciation, with Shotover Country and Hanley’s Farm properties experiencing strong competitive demand, and record-setting sales values. Hanley’s Farm’s new school opening for the first term of 2022 is prompting further interest in the subdivision.
Over 2021, a two-tier market has emerged with investors looking at new stock rather than existing stock. Older style units in established suburbs including Fernhill and Frankton are seeing interest from the first home buyer market.
In terms of residential investment, the Government announced new rules in May 2021 around deductibility in interest for property purchases and the fact that new builds remain on the 5-year bright-line test rather than the new 10-year rule.
Healthy Homes regulations have prevented lower quality stock from yielding rental income, leaving opportunities for the first home buyer who can live in the home while it is being lifted to the required standards. Residential new builds remain popular, however the aforementioned labour and supply issues are pushing out building timeframes and budgets.
QUEENSTOWN MEAN SECTION & DWELLING SALE
Trends
& Predictions
Premium prices are being paid for sections
Interest deductibility regulations affecting the residential investment market
Continued demand outweighing supply in the residential market
Healthy Homes insulation levels have increased
Terrace housing and townhouses growing in popularity in the Whakatipu Basin Building consents are up on previous years
GOVERNMENT REGULATION CHANGES
These apply to properties with purchase agreements on or after 27 March 2021:
• Bright-line test changed from 5 to 10 years. New builds excluded from change, remaining at 5 years
• Main home exemption from the brightline test modified. Tax calculation changes if the property was not used as the owner’s main home for more than 12 months at a time within the applicable bright-line period
• Short-term accommodation given definition of dwelling, so subject to bright-line test and other long-term accommodation rules
• Interest deductions on existing residential property will be changed from 1 October 2021, phasing out through to 2024
• Funds borrowed for home maintenance and improvement are non-deductible, effective immediately
• Property developers can still claim interest as an expense.
SUBDIVISION DEVELOPMENT ACTIVITY
Significant section supply is in the works around the district, with Kawarau Heights, located between Lake Hayes Estate and Shotover Country, seeing strong initial interest. Koko Ridge, near Shotover Country, is proving a popular offering with earthworks underway on large residential lots. Hanley’s Farm is also still offering sites to the market.
Subdivisions in the Coneburn Valley, planned or underway, are Coneburn Valley, Willow Pond and Homestead Bay, with a variety of high-end and mid-range section offerings, as well as off-the-plan duplex units. In late October 2021, QLDC councillors voted to adopt the $1.4 million Ladies Mile masterplan, opening up the opportunity for high density development for the area.
Lifestyle
Strong sale prices across the QueenstownLakes District residential market have been mirrored in the larger lots and semi-rural properties associated with the lifestyle market. 2021 has seen 40 dwelling sales in excess of $3 million, compared with 23 in 2020, and 13 in 2019. The upper echelons of the market have also been bolstered, with four sales recorded at prices above $10 million. In terms of median sales data, both lifestyle section and dwelling sale prices have approximately doubled between 2016 and 2021.
GIBBSTON VALLEY RESORT
Gibbston Valley Station is currently being developed to provide lifestyle housing and sections. The first stage named ‘The Vines’, is well into the construction and pre-sale phase. The Vines is a gated community with Architect-designed homes surrounding a central pavilion and coach house. The master plan for the development also proposes a golf course and club, spa and restaurant and a vintner’s village shopping precinct.
Source: gibbstonvalley.com
Both
lifestyle section and dwelling sale prices have approximately doubled between 2016 and 2021
Whilst sale prices are significantly higher year-on-year, sales volumes are tracking on a slight downward trend for lifestyle sections due to limited supply. Lifestyle dwellings are likely to show a significant increase in sales volumes over 2021 and 2022. New lifestyle subdivisions are expected to come online in 2022, dependent on Proposed District Plan outcomes. Interest in this market sector remains at elevated levels and appears to be popular with buyers relocating from the cities or overseas. In addition, we have continued to see strong growth in less centrally located lifestyle areas such as Gibbston Valley, the Crown Terrace, Morven Ferry/Arrow Junction area and the western suburbs of Bob’s Cove and Wilson Bay.
Average Price YTD Sept 2021
RURAL & LIFESTYLE SECTIONS -18% (projected)
Lifestyle Sections Sold YTD Sept 2021 YE Dec 2020 72
proj. 59
RURAL & LIFESTYLE DWELLINGS
Average Price YTD Sept 2021 65 proj. 87
YE Dec 2020 $3.537m $4.401m
Lifestyle Dwellings Sold YTD Sept 2021
(projected)
Dec 2020 66
CASE STUDY
CASE STUDY
6 TRENCH HILL ROAD, QUAIL RISE
Three bedroom, two bathroom family home with two living areas in soughtafter location. 1,949m2 section.
SOLD APRIL 2021 $1,250,000
SOLD SEPTEMBER 2021 $1,390,000
ANNUALISED GROWTH 27.00%
3A ADA PLACE, LAKE HAYES ESTATE
685m2 section off the northern side of Ada Place, subdivided from the parent lot.
SOLD JANUARY 2021 $485,000 SOLD JULY 2021 $572,000 ANNUALISED GROWTH 35.90%
Queenstown’s residential rental market has rebounded from last year’s post-lockdown fall of approximately 20%. Rental properties flooded the market after the collapse of short-term rental activity during the initial lockdown, but some of these have returned to short-term. Government regulations, including Healthy Homes, have placed some pressure on owners of older rental homes to upgrade their properties to meet the new standards.
New residents moving to Queenstown appear to be keeping the rental market active, with many relocating from other areas of New Zealand for lifestyle reasons or returning from overseas.
Commercial
Queenstown CBD
The Queenstown CBD is currently in a rejuvenation phase with significant infrastructure and roading upgrades underway. This, coupled with lack of parking and loss of international tourists, has seen some businesses end their tenure in the CBD. However, in terms of the property market there is still good demand for prime CBD tenancies with minimal vacancy appearing. Lease negotiations appear more balanced compared with pre-Covid and key money payments have dissipated. Secondary retailing areas have been harder hit with some vacancy appearing and downward pressure on rents. Some risk remains in the retail and hospitality sector.
Over the past 18 months rental abatements during lockdowns and resultant trade-up periods have become commonplace. The majority of rent relief has now ended with the exception of some agreements tied to the international border re-opening. The government is currently consulting on changes to the Property Law Act to mandate rent relief.
These factors haven’t hampered investor confidence with strong sales activity occurring this year across all price brackets (sub $10m - $30m +). A trend of yield compression continues with all sales this year having estimated net yields of sub 3.5%.
Further confidence can be seen in the market with two developments underway; the Upper Village Brecon Street development (see opposite page) and the remodel of O’Connell’s Mall to be predominantly occupied by ‘T Galleria by DFS’, a large high-end retail store housing a significant number of international brands who are new to the CBD.
CBD COMMERCIAL MARKET KEY INDICATORS
HENRYST
INFRASTRUCTURE UPGRADES
Queenstown Lakes received funding of $85 million under the Way to Go partnership with Waka Kotahi NZTA and the Otago Regional Council to redirect traffic from the town centre, making it more pedestrian and cycle focused.
For tenants in the CBD, these works are having an adverse effect on business. Upon completion the CBD will comprise refreshed streetscapes, easier access, and potential for new commercial zones.
These upgrades also signal the end for the community facilities known as QPACT. A new facility known as ‘Te Atamira’ will offer approx. 1,400m2 of dedicated arts and culture space in Remarkables Park, housing artists, potters and a dance studio.
MELBOURNEST
9B CHURCH LANE
A contemporary three-level central Queenstown building comprising retail and accommodation. Leased to three separate tenants at time of sale.
SOLD JUNE 2021 $2,700,000 ESTIMATED NET MARKET YIELD 3.56%
BRECON STREET - UPPER VILLAGE
Upper Village is the CBD’s new food and entertainment destination located near the top of Brecon Street, opening for Christmas 2021. This is a significant development for the downtown area anchored by entertainment giant Kingpin, occupying approximately 3,000m2 over two levels. Alongside Kingpin will be a range of international and local hospitality brands including Beerhaus, a 700m2 Belgian Beer Café, plus El Camino Cantina, Anita Gelato, Max Brenner Chocolates and local brand
Future Bars with their Ice Bar concept. Upper Village is near fully leased with one tenancy remaining for lease of 400m2.
This upgrade and new development will have its own gravity, accentuated by the well-connected pedestrian routes included within the new plan.
11-13 REES STREET
Two-level central Queenstown building with ground floor retail space and first floor offices. Prime retail area, fully leased.
SOLD JULY 2021 $17,000,000
ESTIMATED NET MARKET YIELD 3.47%
CASE STUDY
FRANKTON
Frankton has steadily grown alongside the CBD as a secondary retail and office hub, with many businesses moving to or opening branches at 5 Mile, Queenstown Central or Remarkables Park. This is mostly attributed to convenience and high population growth in the surrounding suburbs, together with offering a shorter commute for those traveling from Arrowtown or Cromwell.
New office stock is filling up in the retail zones. Some of these tenants are new businesses to the area, while others have relocated from town, looking for larger spaces, proximity to suburbs and offering amenity. Onsite parking within existing and proposed developments are far more prevalent than within the CBD. Forward-thinking developers are now proposing car stackers to accommodate increased future demand.
In time, we expect to see upward pressure on rentals as demand increases for premium spaces in Frankton. Many existing leases have growth built into them and this will see a steady increase in this sector.
We expect to see upward pressure on office rentals as demand increases for premium spaces in Frankton
REMARKABLES PARK DEVELOPMENT
New commercial stock is in the works for Frankton. A cinema complex is currently under construction at Remarkables Park, which will also house two floors of office space as well as hospitality and retail leases. The government-backed Retail and Innovation hub in Remarkables Park will have technologically-centred commercial ventures. The aim of this is to help Queenstown move away from its primary reliance on tourism.
QUEENSTOWN
The industrial zone around Gorge Road is seeing some vacancy and flatter rental growth, but has the potential for a shift in focus for the future, partly due to Ngāi Tahu’s Te Pā Tahuna housing development, which is under construction at the site of the old high school.
FRANKTON
Frankton’s industrial area has been seeing a recovery toward pre-pandemic rental rates, after a short, sharp decrease following the 2020 lockdown. As per nationwide trends, industrial property has continued to perform strongly given the ‘essential’ nature of many industrial occupiers and perceived stability in this market sector. There is decreasing vacancy in smaller tenancies, with newly developed properties tending to be more popular than older existing stock. Vacancies in medium-large tenancies are minimal. Limited levels of rental abatements remain in late 2021 with incentives for new leases diminishing.
Showroom property and land in high-traffic locations is attracting strong rental rates and land values on transaction. Planned developments on Hawthorne Drive / Grant Road appear to be proceeding with tenants typically relocating from existing premises.
117 GLENDA DRIVE, FRANKTON
Modern stand-alone building with a gross floor area of 148.5m², situated on a 651m² block of freehold land fronting Glenda Drive. Sold off market to the tenant.
SOLD MARCH 2021 $1,350,000 ESTIMATED NET MARKET
3.60%
BUNNINGS WAREHOUSE, 150 FRANKTONLADIES MILE HWY, FRANKTON
A precedent-setting sale in the Frankton industrial area. Large purpose-built retail warehouse on a 1.62ha high profile site. Sold with a 12 year lease. Sale was the strongest yield ever paid for a Bunnings investment sale in Australia & NZ. Sold off-plan to a private investor.
SOLD FEBRUARY 2021 $33,500,000 NET CONTRACT YIELD 3.87%
CASE STUDY
Image is artist’s impression
Tourism & Hotel Market
The closure of the Australian border and the 2021 Auckland lockdown landed a double blow for the Queenstown-Lakes tourism economy. A 2021 business survey in Queenstown indicated over half of the town’s accommodation and hospitality businesses would struggle to survive another six months from late 2021 if Auckland continued in lockdown.
However, demand for tourism property has been strong, especially for centrally located properties with development potential, with recent transactions indicating strong value levels. Purchasers have included large-scale hotel developers, demonstrating confidence in the region’s recovery and forecast visitor numbers.
MBIE visitor spending for the year to August 2021 shows that domestic visitors to Queenstown spent $539 million. This is an increase of 53% on the previous year’s figures, indicating that locked down borders have helped Queenstown become a popular destination for those New Zealanders who may have otherwise spent their money overseas. However, international visitors spent just $56 million, down 82% on the previous year.
Colliers’ Hotels report for the year ended September 2021 shows Queenstown falling behind the rest of the country in terms of occupancy year to date, at 39%. However, this does not account for the approximately 25% of New Zealand hotels being utilised as MIQ facilities, of which none are located in Queenstown. Room rates in Queenstown average $190 per night, 34.7% lower than the previous year.
With lockdowns and Alert Levels being fluid at time of writing, the future of occupancy rates and tariffs becomes challenging to predict. Airbnb owners may reside in their holiday homes over peak periods or return these homes to the long-term rental market. $190
HOTEL ROOM SUPPLY
The Holiday Inn and Quest hotels in Remarkables Park are both due to open by the end of 2021. Also in the Frankton area, the Sudima at 5 Mile is opening February 2022. These three hotels will add a combined total of 342 rooms to Queenstown’s hotel stock. A 60 room Radisson branded hotel on Man Street in central Queenstown, which was placed on hold last year, is now under construction. This is the only hotel currently under construction in the CBD area. $539m
CASE STUDY
CASE STUDY
LOMOND LODGE MOTEL, MAN ST, QUEENSTOWN
Lomond Lodge is a 12 unit motel located in Central Queenstown. This sale was of the Freehold only.
SOLD SEPTEMBER 2021 $5,200,000
ESTIMATED NET MARKET YIELD 4.20%
DECO BACKPACKERS, 48-52 MAN STREET, QUEENSTOWN
Existing backpacker hostel comprising dorms and private rooms, located a five minute walk to CBD on 1,967m2. Bought for redevelopment purposes.
SOLD MARCH 2021 $8,300,000
PRICE PER M2 (LAND ONLY) $4,220
WĀNAKA
Despite predictions and some interruptions to the local economy due to the pandemic, Wānaka is still experiencing growth in the property sector.
Wānaka’s continued growth during the pandemic appears to have been fueled by low interest rates, historically increasing property prices and attractive lifestyle opportunities. Reduced overseas buyers due to border closures are being predominantly replaced by New Zealanders wanting holiday homes and places to live.
The Wānaka commercial market has remained steady although there appears to be a two-tiered economy, with Backpackers and Motels feeling the pressure with no international visitors and some New Zealanders choosing not to stay at these establishments. Additional lockdowns during the 2021 winter period caused further disruptions. Retail and hospitality are volatile while the wider construction industry is booming and in expansion mode.
Residential building consents have risen steadily in the past decade, with 426 expected by the end of 2021 based on data to June, up from 361 last year. The number of non-residential consents issued remains steady, with 12 expected by the end of the year.
INFRASTRUCTURE DEVELOPMENTS
Construction on Stage Three of the Wānaka Lakefront Development Plan has recently been completed. This includes a boardwalk around the lake’s edge and a shared cycle/pedestrian pathway creating continuous access along the lakefront, boosting the accessibility of the downtown area.
Mount Aspiring College is undergoing a major upgrade with approximately 46 million dollars in renovations. The plan consists of five stages which will enable the school’s current capacity of 1,000 students to grow significantly, housing 1,600 students.
Residential Trends
Time on the market for residential listings is short across all sectors
Housing stock is low and there are limited greenfield developments in the process of being developed to meet the high demand for land
First home buyers are mainly buying into Northlake subdivision, Albert Town, Luggate and Hawea
Lifestyle and $3 million+ properties remain popular
Stages 1 and 2 of the Pembroke Terrace residential development sold out within a short time frame.
Stages 3 and 4 are due to be released before the end of 2021
1 WALLACE PLACE, WĀNAKA
A 1,012m2 level site with good mountain views.
APRIL 2019
7 KENNEDY CRESCENT, WĀNAKA
A 1970’s built largely original two-level dwelling. Situated on a 1,012m2 site affording lake and mountain views. Has subdivision potential (subject to obtaining the necessary consents).
96 MILLS ROAD, WĀNAKA
A 464m2 elevated site with expansive lake views.
STUDY
41 FOREST HEIGHTS, WĀNAKA
A 2012 built architecturally designed part threelevel split floor height dwelling. Obtains excellent mountain and lake views.
Source:
Residential Rental Market
Immediately after New Zealand’s first lockdown, the number of rental listings increased substantially, with the shortterm accommodation market at a stand-still. Rental rates decreased due to the increased supply. In the 12-18 months following the initial lockdown, long-term rental supply decreased, with rental rates increasing and surpassing 2020 levels. Long-term rental properties remain in short supply.
Legislation limiting rent increases to once every 12 months has anecdotally seen some landlords fixing this increase into their agreements.
Source: Colliers
Commercial & Industrial
Wānaka commercial property is primarily underpinned by the local market, with a limited number of tourism operators in the town centre.
Wānaka’s commercial property market appears to be stronger than it was pre-Covid. A number of sales have occurred within the CBD, including some on the periphery indicating strong yields.
Retail areas currently have nil to low vacancy. Offices remain highly sought-after with limited availability. New leases are rare, but when they are agreed, they attract strong rental rates.
Three Parks commercial/industrial development is ongoing, with the construction pipeline looking relatively strong for the next two – three years. Although there are limited transactions, recent vacant industrial land and improved industrial building sales have sold for well in excess of preCovid value levels. Rental rates have remained steady for industrial leases.
FILM SET PLANS
Corbridge Estate, which extends from SH6 to the Clutha River approximately 7km east of Wānaka, is under contract by New Zealand-owned film studio, Silverlight Studios, with plans to establish a film park. If the plans are consented, the studio is expected to inject $1.7 billion into New Zealand’s economy, including $969 million in the Queenstown Lakes area. The plans include on-site accommodation and there is potential for over 4,000 new local jobs within the Queenstown-Lakes District.
WĀNAKA COMMERCIAL MARKET KEY INDICATORS
WĀNAKA INDUSTRIAL MARKET KEY INDICATORS
99 BALLANTYNE ROAD, WĀNAKA
A 2,897m2 level Three Parks Business Zoned site with a long 45m road frontage to Ballantyne Road.
SOLD SEPTEMBER 2021
$2,610,000 PRICE PER M2 $901
MT CARDRONA STATION
Mt Cardrona Station is a new development set within 400ha of land above the Cardrona Valley, located 15 minutes from Wānaka and 45 minutes from Queenstown International Airport. Stage One consists of three releases, with the first release set to commence construction in 2022. Twenty individual neighbourhoods will consist of residential homes, visitor accommodation and village amenities.
The development allows for significant expansion of the Cardrona area with the village centre including The Homestead (dining, shared workspaces and meeting rooms) and The Adventure Centre (a gym, hot pools, swimming pool and a ski and bike workshop). There will also be 30km of biking and hiking trails within the development.
Source: Mt Cardrona Station
43 HELWICK STREET, WĀNAKA
An elongated single level commercial building constructed in the 1980’s. There are two carparks at the rear of the building and the site has good redevelopment potential.
SOLD NOVEMBER 2020 $2,240,000 ESTIMATED NET MARKET YIELD 2.95%
CROMWELL
Cromwell’s steady growth continues as it maintains its role as a hub for distribution in Central Otago, while offering relative affordability for both residential and commercial buyers.
Cromwell’s popularity as a place to do business is increasing, bringing industry into the town and boosting its population growth. This is reflected in the many new residential and commercial developments in the area, both proposed and recently completed.
Cromwell’s horticulture industry has suffered some losses due largely to the pandemic and difficulties securing seasonal staff, but the town’s central location and ease of connection to larger cities in the South Island have allowed it to come through the pandemic relatively unscathed.
The much-maligned central mall area has long required upgrading or remodeling. The Central Otago District Council’s Long-Term Plan has earmarked some $42 million in its recent budget towards developing the Arts, Culture and Heritage Precinct and upgrading the town centre. Cromwell’s Lake Dunstan Charitable Trust received a $953,000 boost from the government to aid its work in landscape restoration, community outreach and the development of a shared community vision and plan for Lake Dunstan over the next four years. This will help to further increase Cromwell’s popularity as a favourable place to live, work and visit into the future.
SECTION DEVELOPMENT
Wooing Tree Estate is a 25ha master-planned development located adjacent to the high-profile Wooing Tree vineyard on State Highway 8B. Resource consent is approved for 308 residential lots plus a new cellar door and boutique hospitality and tourism precinct. Stages 1 and 2 have sold out and Stage 3 has just been released at the time of writing with strong sales activity. Stage 1 has had titles issued.
River Terrace was intended as a master-planned community of up to 900 houses, however is now being sold down as 17 rural lifestyle blocks and the balance title of the upper terrace sold as a rural block. Rural lots range in size from 1.32ha to 3.92ha.
Residential & Lifestyle
Recent developments at Prospector’s Park and Gair Estate are now well established and vibrant communities
Rental offerings are keeping pace with the building boom in the area and prices remain affordable when compared with Queenstown and Wānaka
Many recently developed properties are sized and priced out of reach for most local residential buyers.
There is a lack of smaller, affordable properties on offer
Commercial & Industrial
• Cromwell Industrial Estate is offering 29 sections on 4.8ha to the south-west of the town centre. Early sales interest is indicative of high demand
• Adjoining the Cromwell Industrial Estate, the new Harvest Park industrial subdivision is also offering vacant industrial sites
• Industrial rentals are strong, with a marked difference between new, recently built property and older stock
• Well located properties on McNulty Road remain popular with showroom space in demand
• With recent releases of industrial land for sale, there is good interest in not only local businesses developing new premises, but also Queenstown and Wanaka businesses relocating to Cromwell, as well as freightrelated national businesses
• Centrally-located office tenancies are scarce and in demand. This will increase further when the town centre is upgraded. Some offices are locating to the industrial zone.
Owned by the Central Otago District Council, this industrial subdivision was introduced to the market in August 2021 as a deadline sale campaign. The lots were aimed at assisting local companies into a business base, with mainly smaller sized parcels of land on offer. 10 Lots were offered in the first release and all sold. The sales agreement offered the opportunity for purchasers to nominate more than one lot. Average sale price per square metre was in excess of $500+gst. Title is due for issue in the third quarter of 2022.
SOLD SEPTEMBER 2021
$262,000 - $449,000+GST
CROMWELL COMMERCIAL MARKET KEY INDICATORS
CROMWELL INDUSTRIAL ESTATE
CASE STUDY
Horticulture & Viticulture
There is presently strong demand from wineries for Central Otago grapes. This interest, combined with people looking to relocate to Central Otago for lifestyle reasons, has led to a demand for viticulture properties during 2021. While development of new vineyards had slowed over the past few years, new vineyard developments are emerging again due to the demand for quality Central Otago grapes.
Horticulture has seen sustained growth over the last decade, with new growers entering the market. The limited number of traditional overseas fruit pickers and unfavourable weather conditions saw some significant losses for the industry over the past year, especially for cherry growers. There is concern in the industry for the coming packing season due to elevated freight costs and labour constraints, however the sectors appear to be collaborating on staffing issues where possible to alleviate this pressure.
This 9.8870ha property has 5.55ha of planted vines, and a long-term lease in place to one of Central Otago’s premier wine producers. Set in a private position close to Cromwell.
SOLD SEPTEMBER 2021 $1,650,000
Large scale vineyard that had been on the market for several years. Sold to an investor who purchased equity in the holding company.
SOLD SEPTEMBER 2021 $2,650,500 (46.50% SHARE IN THE LAND AND COMPANY)
CASE STUDY
29 MCFELIN ROAD, CROMWELL
351 MAORI POINT ROAD, TARRAS
CASE STUDY
DUNEDIN
The Dunedin property market has seen steady growth across all sectors, with a slight population gain year-on-year along with good increases in student enrolments.
The ramifications of Covid do not appear to have adversely affected the Dunedin property market, with the city receiving a small boost by new residents relocating to the south, overseas returnees, North Islanders looking for a quieter and more affordable home base, and an increase in student enrolments providing stimulation to the local market.
Residential sales have continued to happen at pace, with residential investment bucking the trend for a few months with limited activity as sellers and buyers choose to hold through both the Covid lockdown and the changing legislative environment.
Overall, there is high demand for new homes, stimulated by low interest rates and government policy. Existing homes, although becoming slower to move, are still limited in supply. Lower income earners are finding it difficult to borrow, while multiunit and large student flats continue to remain popular with investors when available.
Commercial yields compressed significantly across 2020-21 despite the pandemic, driven by the low interest rate environment and confidence in the Dunedin area on the back of major capital works either underway or in the pipeline. One such project is the new hospital development, which is predicted to massively boost the city’s economy by an estimated $429 million GDP.
The Dunedin office market is characterised by limited supply which has driven office rentals to new heights for premium space. Dunedin’s Retail Quarter upgrade begins in November 2021 with an updated streetscape planned, along with new underground services, but it is unknown how Dunedin’s retail will respond.
Residential Trends
Apartments are popular
and when put to the market are selling well. This is unlikely to change in the near future, with planned supply expected to still not match current demand in the city
Student investment property yields are at around 5.00 - 5.50%
Sales in $1 million+ range have increased in the past year, with Mosgiel remaining especially soughtafter. For 2021, the number of sales in this price bracket in Dunedin is on track to reach 125, up from 104 in 2020 and 50 in 2019
New government regulations around Healthy Homes have seen investors move away from the suburbs. Modern and new builds remain popular
Development of previous non feasible land is now proceeding, being triggered by the current demand and vacant section price point. Consented subdivisions with between 20 -100 lots are in the pipeline. One such development is in Broad Bay which could provide close to 100 lots to the residential market and is likely to be popular
University Investment Property
Student enrolment numbers at both the University of Otago and Otago Polytechnic showed substantial increases for 2021 year-on-year. While both have lost international enrolments, domestic enrolments have increased.
This has spurred an earlier-than-usual 2022 letting season, with many students enquiring about flats as early as March 2021. These early enquiries may be a causal factor in rent increases as most central campus rents have increased by approximately $10 per room per week, with reports of some increasing by up to $25.
Residential Tenancy Act changes are set to disrupt the student market also, as fixed-term tenancy rules prevent landlords from increasing rental rates mid-tenancy. Some landlords may look to mitigate this by setting rent at a higher rate at the start of the tenancy. Some may also be raising rents to cover the new interest deductibility rules.
As fixed-term tenancies roll out, some tenants may look to retain their flats through the summer in order to prevent being locked out the following year under a new tenancy arrangement.
Student enrolment numbers ... showed substantial increases for 2021 year-on-year
25 ETHEL BENJAMIN PLACE, NORTH DUNEDIN
Prominent location within the University campus. This 7-bedroom student flat is a coveted portfolio asset for its proximity to the central campus, medical and dental schools as well as the city centre. Flats are often signed very early in the middle of the previous year for 12-month calendar fixed leases.
SOLD MARCH 2021 $1,210,000
YIELD 4.60%
449 LEITH STREET, NORTH DUNEDIN
Quintessential student villa. The popularity and impressive rental history are attractive factors for investors who competed strongly for this property. SOLD APRIL 2021 $940,000
Commercial & Industrial
Geographically constrained by hills and sea, there is little in the way of new industrial development in central Dunedin, but sales values and rental yields are increasing, fueled by lack of supply, strong regional activity, and business confidence in the region.
Office and industrial lease yields throughout Dunedin have historically been higher than other regions of New Zealand, making this sector a popular choice for investors. Most have seen a sharpening of yields since pre-Covid, with prime retail leasing being the only area that has not demonstrated significant gains.
While sales over $2 million in the commercial sector have increased slightly since 2020, the growth seen in previous years has dropped away, largely due to a lack of available land In terms of industrial development properties on the market for sale, North Taieri, being the only greenfield industrial land to open up of late, is starting to gain traction despite a fragmented release.
Sales values and rental yields are increasing, fueled by lack of supply
The new four-storey office building as part of a joint venture between Ngāi Tahu and ACC will begin construction soon on the Dowling Street site purchased from the Dunedin City Council. This will be the first new office building of this scale since Otago House was built in the late 1980’s. Scheduled for completion in 2024, it is hoped to spur on other large projects of its kind within the city centre.
In addition to the ACC build, Otago Polytechnic and the University of Otago continue to be major players in the market, with both having large capital spend projects underway and in the pipeline, along with the Dunedin Retail Quarter upgrade and the significant new hospital development.
Source: Colliers
484 GEORGE STREET, DUNEDIN
Freehold centrally located retail property (food & beverage) with a land area of 1,012m². Sold with long-standing tenant in place (Lone Star) with 2 years remaining on current lease term.
55 GORDON ROAD, MOSGIEL
Freehold new build retail property (supermarket) located in the popular suburb of Mosgiel with a land area of 1.2124ha. Sold with a 10 year lease in place to General Distributors Limited t/a Countdown. SOLD MARCH 2021 $20,163,000 NET CONTRACT YIELD 4.75%
CASE STUDY
KEY INDICATORS
DUNEDIN RETAIL MARKET
Sector
+ GST + OPEX)
DUNEDIN INDUSTRIAL MARKET
Sector
OUR TEAM
Valuation and Advisory Team
JOHN SCOBIE
Registered Valuer / Consultant
Queenstown
MATT CROWTHER
Registered Valuer / Consultant
Queenstown
GEOFF MCELREA
Registered Valuer / Consultant Wānaka /Cromwell
JODI TODD
Registered Valuer / Consultant Wānaka
JOE CHAPMAN
Registered Valuer / Consultant
Dunedin
KAYLA JAMES
Valuer
Dunedin
HEATHER BEARD
Registered Valuer / Consultant
Queenstown
KATE BOE
Valuer
Queenstown
LISA SCOTT
Registered Valuer / Consultant Wānaka / Cromwell
LYNETTE BAILEY
Valuer Wānaka
DUNCAN JACK
Registered Valuer / Consultant
Dunedin
BARRY MURPHY
Registered Valuer / Consultant
Queenstown
SAM MENZIES
Valuer
Queenstown
TOM JARROLD
Registered Valuer / Consultant Wānaka
LAURETTE YOUNG
Valuer Wānaka
JADEN HAREB
Registered Valuer / Consultant
Dunedin
Commercial Sales and Leasing Team
MARK SIMPSON
Commercial Broker
Otago / Southland
TIM THOMAS
Commercial Broker
Queenstown
BARRY ROBERTSON
Tourism / Development Broker
Queenstown
DEAN COLLINS
Commercial Broker
Otago / Dunedin
ALASTAIR WOOD
Commercial Broker
Otago / Southland
MARY-JO HUDSON
Commercial Broker
Queenstown
STEVE MCISAAC
Tourism / Development Broker
Queenstown/Cromwell
TYLER DICKISON
Commercial Broker
Dunedin
RORY O’DONNELL
Commercial Broker
Otago / Southland
MARIE HENDREN
Commercial Broker
Queenstown/Cromwell
DOUG REID
Commercial Broker/ Lifestyle Sales Consultant
Queenstown
Residential Sales Team
ROGER ELLIS
General Manager of Real Estate
Queenstown
BRENDAN QUILL
Sales Consultant
Queenstown
EMMA LUPS
Sales Consultant
Queenstown
HUGH CLARK
Sales Consultant
Queenstown
DAMO YORG
Sales Consultant
Queenstown
MATT MORTON
Sales Consultant
Dunedin
Rural and Lifestyle Team
RUTH HODGES
Director
Otago / Southland
FRED BRAMWELL
Sales Consultant
Queenstown
RICHIE HEAP
Sales Consultant
Queenstown
JAMES O’HAGAN
Sales Consultant
Queenstown
NICOLE BELL
Sales Consultant
Queenstown
ZACH HYLTON
Sales Consultant
Queenstown
STEPHEN HEBBEND
Sales Consultant
Queenstown
JESSE JOHNSTON
Sales Consultant
Queenstown
RAYLENE MCQUEEN
Sales Consultant
Queenstown
WYNDHAM
Sales Consultant
Queenstown
VERA STEWART
Sales Consultant
Queenstown
MIKE EYLES
Rural & Lifestyle Sales
Otago / Southland
REBECCA TURLEY
Rural & Lifestyle Sales
Otago / Southland
GRETA MASON
Rural & Lifestyle Sales
Otago / Southland
MARIA
Colliers Otago offers a broad range of specialist property services, with a knowledge-driven approach and global reach. Our combined team 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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Queenstown 03 441 0790
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