Any investment tips for NZ?



From: Samantha Lennox

Has anyone out there had any experience with investment properties in New Zealand and in particular in Queenstown? If so, I would love to pick your brain.
I am an Australian living in Singapore but after a recent trip to Queenstown decided that I would live there in about a year or so. There seems to be great property investment potential down there. I know what is said about the advantages of investing in your own back yard but Singapore is not an option. If anyone is aware of a discussion group for NZ properties or has relevant contacts in NZ I would be very appreciative.
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Reply: 1
From: Tony Dixon

Hi Samantha,

>Has anyone out there had any
>experience with investment
>properties in New Zealand and
>in particular in Queenstown?
>If so, I would love to pick
>your brain.

Well, I control a small property in the Sth Island of NZ - about 4 hrs drive from Queenstown.
It was purchased when I was living there 3 years ago. And I've been to Queenstown 3 times too. Does that qualify me?

Unfortunately I am no expert on values there, but can offer some thoughts.

>I am an Australian living in
>Singapore but after a recent
>trip to Queenstown decided
>that I would live there in
>about a year or so. There
>seems to be great property
>investment potential down

So do you intend to live there? And rent it out in the future?
If you are going to live there forever then perhaps picking up a bargain may not be so important.
Otherwise you should spend some time getting to know the market as you would if you were investing in any other town.

If you are going to rent it out...
Queenstown has a different type of rental market to your average town, due to the seasonal tourists. Rents/hotels rates are astronomical during ski season, as you have probably experienced, but can drop off considerably for non-peak months.

E.g. One week before ski-season started, my wife and I walked into The Heritage and got the honeymoon suite for $130/night for 3 nights - with breakfast thrown in for good measure.
A week later it was closer to $500/night!

Also, you should be aware that there was quite serious flooding of low-lying areas about 4-5 years ago. The town was cut off for many weeks.
No doubt it will happen again. Insurance can be a problem.

The local council a few years ago were very pro-development, much to the annoyance of the locals, including one Sam Neill.

You could also consider buying in Arrowtown? Or Wanaka?

I think the important thing about buying in Queenstown is to get a fantastic view. You'll pay a lot more for that, but it will certainly continue to grow in value.

It's a beautiful part of the world.
I'd love to own a home there.

cheers, Tony
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Reply: 1.1
From: Craig Sutherland-Muir

Hi Samantha.

I lived in Queenstown for about 5 years a while back and have watched the area a little since then. Unfortunately I have only very recently started looking at investing, so I don't have direct experience in the Qtwn market. However, that being said, here's my 2c worth.

Qtwn itself has (generally) inflated prices (in my opinion overly so). While the council is pro-development, the local community does oppose a lot of that, which can slow things down a bit. Development is also geographically limited - there's only so much valley you can develop. As Tony pointed out, rents vary if you're into seasonal rental, but a lot of property is rented out in the "normal" manner. Some even rent out normally for 10-11 months of the year on a fixed term lease then go for the tourist market at high rates over the remainder.

Because of these factors, amongst others, there's a pretty big shortage of accommodation in town, so more and more workers are commuting from the likes of Cromwell and Kingston (about 1/2 an hour).

There lie the big opportunities, I reckon. Cromwell has seriously lower prices than in Queenstown and Wanaka and I think a far more stable population base.

If you want to LIVE IN Qtwn or Wanaka, you can look / wait for a good deal before you go. Or you could go somewhere like Cromwell (or Glenorchy for that matter - it's much nicer and cheaper still) until you can get a good deal.

If you want to INVEST in the Southern Lakes region, again you can look / wait for good deals (and to be honest, I really don't know how often they're around). The chances are you'll end up with pretty high outlay and a OK rental returns. OR, look at somewhere like Cromwell where the outlay is substantially less. The rental income is also less, but I don't think it's so much less as to offset the difference in outlay.

In other words, I think Cromwell would give you better RETURNS.

So there's my 2c worth. A bit long winded, but hopefully it gives you some more to think about.

Good luck. Keep in touch, I might even see you there in a couple of years - I'll be moving back to NZ some time next year.

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Reply: 1.1.1
From: Samantha Lennox

Thanks for your comments Tony and Craig, much appreciated. Tony you are correct in your reading of my original post. I am looking for an investment property but I may live in the property for a while too. I have been considering buying a house close to town that needs some work and doing the live in renovation thing and then rent it out. Affordable accommodation for workers seems to be in extremely short supply in Queenstown. In fact, when I was there, there were front page articles in the local newspapers saying just that. My concern with providing that sort of accommodation is the tenants may not be reliable with paying rent or keeping the place clean. There seems to be an abundance of high end accommodation and there are a few apartment complexes currently under construction in the centre of town. This leads me to consider backpacker accommodation. The downside I can see with this is that you need a full-time manager. I'm still considering all the options...
As for why Queenstown and not one of the neighbouring towns. Land close to town is in very short supply which tends to suggest good capital gains potential. Although Queenstown is dependant on tourism there appears to be a tourist market all year round and in fact summer is busier than winter. Anyway, many more things to consider, thanks for your assistance to date.
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Reply: 2
From: Tom Moschitz

Hi Samantha,
QT is really hot at the moment! A good friend just this week sold an IP on the hill above the town for $400k, he bought it for $280k only 5 months ago. It was recently valued at $320K
With no capital gains tax in NZ and such a silly offer he thought what the heck.

Proceed with caution,

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