The panel convened by Locations Director-Greg Ross are all established Queenstown property investors that have seen - and worked through - the highs and lows of the local real estate market and economy for many years.
As you'll see, their insights are very positive about the opportunities that exist here right now, and where Queenstown could grow to in the future.
The Panel
Greg Ross
As a founding shareholder and Director of Locations Realty, Greg Ross has sold real estate in the region for 28 years, conducting the majority of Queenstown's larger commercial and development sales. He has unparalleled knowledge of the local property market.
Alastair Porter
Head of the Queenstown Lakes District Chamber of Commerce & Industry, Alastair is also Co-Managing Director of Remarkables Park Limited and Shotover Park Limited. These companies respectively developed the highly successful Remarkables Park Town Centre, as well as the Shotover Park industrial zone at Glenda Drive.
David Broomfield
David is a property investor and Director of Woodlot Properties Ltd, whose credits include Goldfields, Quail Rise, Double Cone, Chartres Green, Little Stream (Dalefield) and Closeburn Station (Glenorchy).
Tony Butson
Property investor Tony Butson and his commercial development company Westwood Group Holdings have helped shape Queenstown's commercial centre, with iconic buildings that include the Steamer Wharf, Outside Sports and (recently completed) Mountaineer building. The Mediterranean Market complex on Gorge Road is another of their accomplishments.
Wayne Foley
Wayne is a high-end residential developer, Director of villasqueenstown.com, whose website featuring the Commonage Villas on Queenstown Hill has won a Tourism NZ top tourism website award. Wayne's team are also actively involved in the project management and construction of development/builds in the area.
The Discussion
(Greg Ross) Are the public getting accurate information on Queenstown property development through recent media reports? Have we been told the whole story?
(David Broomfield): "With property investment, you make money if you follow the rules... and the same rules always apply: quality and location. If you get this right, you'll have a good investment."
(Wayne Foley): "Yes, you're still looking at an 8% annualised rate of growth, provided you take a longer term view of your property investment. We look to created added value through ensuring a high quality finishes and amenity values in the property.
Taking a conservative approach to the feasibility of a project means we eliminate the need to talk to finance companies to fund a project correctly.
Reflecting on the last 4-5 years, Queenstown had lost the property drivers that initiated the last round of development: increasing interest rates, unimproved land values that couldn't be supported by the development value, a scarcity of building resource that resulted in higher building costs and poorer quality.
Yet people came here purchasing property and expecting to undertake developments. The math never added up. This was evident in the apartment market, where purchasers were encouraged to invest based on unrealistic cash flow yields.
Some of the property drivers are back in play (I believe), and the next 12-18 months is a buying zone (as completed, unsold developments are finally onsold). Interest rates are still attractive. Banks have adopted a more conservative approach to lending yes, but I'm telling prospective investors that if you have your development numbers right, the banks are still looking at projects.
Fundamentally, any developer should satisfy their own risk assessment for a project... and this should be higher than what the bank expects."
(Greg Ross) Building costs - where are they heading now?
(Wayne Foley): "For the period we're in now, building resources are available and costs are stable for good builders. Subcontractor prices seem to be under pressure, so in the short term we'll probably see a drop in overall cost in some sectors of the commercial building industry."
(David Broomfield): "Materials are going up. I think building costs will go up."
(Alastair Porter): "Big buildings are still priced reasonably for big projects - the figures on commercial builds etc haven't lifted."
(David Broomfield): "I find it hard to compete with the big Christchurch firms. The biggest cost that the public doesn't really see is the $38k development levy. It's the key barrier to the market; it makes it difficult to make anything out of a new-build.
We budget $100k for a new section cost - this covers development levy, then additional associated costs such as resource consent, other council levies, fees, surveyors, landscape architects etc - and then you have the buy the land, then you have to pay for the build. They ask for so much, it becomes not worth the process."
(Greg Ross) Who's buying here at the moment?
(Wayne Foley): "There's still a lot of overseas interest in Queenstown."
(David Broomfield): "Locals are struggling to get in. Buyers are usually Australians picking up a second home."
(Greg Ross) Do you have a sense of how many families are arriving and leaving the area?
(Alastair Porter): "Queenstown is constantly growing largely driven by positive tourism growth. We also see this in the traffic through the Remarkables Park Town Centre. It grew 4% in 2009, 3% so far for 2010, including a reasonable proportion of tourist numbers at approximately 25%, to locals at 75%."
(Greg Ross) Is there an over-supply of zoned land?
(Alastair Porter): "There used to be a shortage of zoned land but now we've got a 10 year plus supply of land zoned for residential. High end are ok, they have finance, but the economy end of the market is often struggling to get finance.
There's a misconception about low land prices; the important thing is to add value to the land when you develop it. When land prices are unrealistically low they actually reduce developers ability to do a good job, because they have no margin to re-invest in the product. The reality is, developers can only do the extras because a margin allows them to: with this gone it's a downward spiral and there is a risk Queenstown will only attract developers who are prepared to undertake very basic unattractive development. That would be very unfortunate for Queenstown."
(Wayne Foley): "Yes, the Council needs to seriously look at what incentives they can put into the marketplace to stimulate quality build outcomes."
(David Broomfield): "Yes, development levies should be cut in half to stimulate economic development."
(Alastair Porter): "There's a mindset to focus excessively on endlessly churning out new Plan Changes, and applying narrow interpretations to objectives, policies, and rules. Its important Council appreciate development is hard work and the major developers in Queenstown are not trying to beat the system but are striving to build quality. We need Council to work with us not against us. On a broader front to stimulate demand and increase the rating base there needs to be an appreciation for the importance of economic development."
(Greg Ross): Looking then at Queenstown's infrastructure and amenities: where should QLDC and the community focus?
(Alastair Porter): "This community already has a great recreational capacity. Determining the focus for future amenities would be greatly assisted if the town had its own Economic Development Agency. This unit could also provide banks with the growth data etc they need to start lending here again. In the past the town had a good run and didn't need to create demand but the game's changed; we need to build the economic profile of Queenstown, and be out there promoting it. There's a lot of potential to attract Australian buyers to come here and it would be advantageous to them and Queenstown if they come sooner rather than later."
(Wayne Foley): "The Australian market is all we need. I wonder why we bother marketing to international markets clearly in major recession, like Europe. Or to share-volume markets (like parts of Asia) that contribute little to the local economy, save a couple of tourist operators."
(David Broomfield): "As rates go up there is less incentive to live here: you need economic growth just to pay the rates."
(Greg Ross): Do we place too much reliance upon Queenstown's tourism sector to underpin our local economy?
(Alastair Porter): "We need to grow the economy, to grow the town. This obviously includes tourism but there are also opportunities here to do other things. It's about creating revenue rather than just focusing on costs. Then, as more people come to live and work here, houses will sell and that bolsters the property market, and broadens the rating base."
(Wayne Foley): "Yes, there's also a buying window here now: Queenstown's a great opportunity at the moment."
(Tony Butson): "Plus, some developers have taken a hit on apartments, but that's given other people opportunities."
(David Broomfield): "This is a unique market. It's the first choice for people's second home because of that."
(Alastair Porter): "The long term trend here is up. I strongly dispute Bernard Hickey's view (Mountain Scene, 27 May 2010) that there's no reason to buy here. Queenstown has a 10 year property cycle - and we're expecting the next peak to be 2013 (2008 being the bottom).
The message needs to get out - Queenstown is a great property buying opportunity at the moment; probably the best value buying it will ever be. If you look at the long term every cyclical low in the market is still always higher than the previous low.
ENDS!
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