Queenstown’s apartment market has picked up since the borders reopened, with agents expecting interest to grow over the coming months.
Simon Green, from Invest Queenstown, says worldwide interest in the tourist town hit hard by the past Covid restrictions is likely to revive, noting that some apartment types common in Queenstown are exempt from the foreign buyer ban.
Queenstown features apartment complexes in formal management arrangements which are deemed commercial so are not part of the foreign ownership restrictions, he says.
These were brought in by Labour in 2018 with exemptions for people with residency and also people from Australia and Singapore.
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But Green says when American and European visitors come back some managed apartments are a proposition they can still buy.
These are apartments which are zoned and rated commercially and are operating commercially under a formal management or lease agreement, he says.
Certain properties, such as The Rees Hotel, LQ and Ramada, qualify and in these sorts of managed apartment arrangements apartments are let out but the owner gets a set number of weeks or longer they can use the apartment.
Invest Queenstown has a twin key apartment, number 111 in The Rees Hotel, listed for $1.595m.
Green says New Zealanders and Australians have been the main buyers since the Covid restrictions were brought in which has changed the ownership demographic.
“But we’ve also got long-term owners from offshore outside of those exempt markets that already own so they can still own them and they’re very reluctant to sell because there’s concerns about being able to buy back in,” he says.
A view of Oueenstown from Lake Wakatipu. Photo / Getty Images
“We've got owners in different complexes from the UK, from Arab Emirates, from all over Southeast Asia, the US, and if they're longer haul they’re coming and living in their apartment for three or four weeks a year - some have stayed for three months.”
Invest Queenstown specialises in managed apartments and also works closely with developers selling off plan, Green says.
“We call it the lifestyle investment space. We specialise in dealing with absentee owners that are looking for sometimes lock and leave but typically managed apartments or properties that they'll use as a holiday home and put into short-term management while they are back at home working.”
A lot of managed apartments came on in Queenstown pre-Covid, and many were also built in the early 2000s, Green says.
“It's different to your likes of Auckland where it's probably very much more dominated by residential apartments; Queenstown apartment stock is very much dominated by that short-term accommodation.”
Invest Queenstown is selling an entry level managed apartment in Gorge Road, listed at $449,000, which is 42sq m but some apartments can be 250sq m in some of the bigger complexes, he says.
“The best examples would be the likes of the Rees Hotel which has got 89 apartments, dual key for the most part and all individually owned by investors.”
Most of his company’s apartments that are listed are under contract now which is a big change since the borders reopened, he says, because for over two years apartments as an investment proposition weren’t delivering a return.
“If you go back to the first quarter of 2020 when Covid really hit we had some kneejerk sales there that showed a 10 to 15 percent softening in pre-Covid prices pretty quickly for people that wanted to exit and exit fast.
A one-bedroom apartment on Gorge Road is on the market for sale for $449,000. Photo / Supplied
A slightly larger two-bedroom unit on Mountain Ash Drive is for sale by way of price by negotiation. Photo / Supplied
“By the time we hit the third quarter, going from July, the Kiwis pretty much burst into town because they couldn't go anywhere else and bought up what was available and we really did recover the prices back to what we were seeing pre-Covid.
“That sort of went through to the end of that year when things settled a little bit.”
But last year, just as the town was looking forward to a busy winter, the border with Australia closed almost as soon as it had opened and that sucked the momentum out of the market until about three months ago.
“It was very quiet through the first half of this year and things have really taken a turn now.”
People are now buying in advance of the income returning and the signs are strong. In July, apartments delivered the best returns for any July, Green says, and that’s despite not having full bed occupancy.
“Even at 80% of capacity the room rates were up and they were pretty much fully booked for the beds they had available and owners were making I would say anywhere between 10 and 20% more for July 2022 then they did for July 2019.”
Outside central Queenstown the apartment market is taking longer to revive, although Richie Heap, from Colliers, says the overall market has definitely picked up and apartments will follow.
He is selling one in Frankton, about 10 minutes from central Queenstown.
Heap says the market is changing and stock which has been on for a while is starting to sell again.
“The thing is people have been sitting on their hands for the last six months waiting for everything to fall apart and I've been saying to people you can never pick the bottom of the market or the top of the market, no one ever does, so if you see something buy it.”
Rental prices are shooting up again because there’s nowhere to stay because people are in town for the season, Heap says.
“Inevitably that will bring the investors back in the market because the rental returns and the yields are starting to get higher.”
The Frankton apartment is dual key and Queenstown as a number of those property types where an apartment can be rented as one apartment or divided up and rented as two.
They’re a good option for investors, Heap says.
“I know an owner that's getting $350 a week from the studio and $450 for the one bedroom so that's $800, whereas if it was just a two-bedroom apartment and two bathrooms like some of the ones we're selling you might only get $650 or $675 so those yields are vastly different.”
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