Queenstown's investment image has not been tarnished by recent development company liquidations and the slew of mortgagee sales, local business leaders and property specialists say.
The plight of the stalled billion-dollar Five Mile housing project at Frankton has become an unwanted focal point for Queenstown.
Following revelations Five Mile Holdings Ltd owed more than $93 million in secured and unsecured claims, few business people in the Wakatipu will comment directly on the attention the development has brought to the tourism resort.
As the global credit crunch continues to take its toll, banks and finance companies in Queenstown are taking action on defaulting clients, forcing through receivership and liquidation proceedings on companies and mortgagee sales on individuals, many of them overseas investors with stakes in managed apartments, or investments with over-extended commercial developers.
It is estimated up to a dozen southern development companies have become embroiled in receivership or liquidation proceedings during the past year.
Queenstown Chamber of Commerce president Alistair Porter said, when approached, companies going into liquidation and developments falling over had exposed three key problems.
"The percentage of unrealistic developers was very low, but what they promoted would have become a big part of the [overall] market," he said.
The "unrealistic projects" were fuelled firstly by "overvaluation by out-of-town valuers" before building began, then sold by out-of-town developers who "did not understand rezoning [requirements] or the necessary time frames".
These two factors were compounded by developments involving the borrowing of large amounts of money.
"Some developers relied on a time [frame] then ended up with expensive mezzanine debt [from finance companies] they were not able to service. That led to high penalty payments they were unable to meet," he said.
"Queenstown has not been particularly badly tarnished. People have been able to spot what's happening," he said of "big projects that were never going to get off the ground".
Mr Porter, as managing director of the Porter Group and the Remarkables Park development, said Queenstown remained "a better buy now than it was", with prices suppressed.
He noted property in the area would resume a "climbing trend".
Iain Nellies, of Insolvency Management Ltd, the South Island's largest liquidator, said while the actual number of receiverships and liquidations was not necessarily increasing in the Wakatipu basin, the size of some individual debts was "substantially larger" than elsewhere in Otago.
"There's not a great deal more [Wakatipu liquidations] than normal, but because of the entrepreneurial flare-up in Queenstown the land values kick in and the [financial] numbers are bigger," Mr Nellies said.
One of the predominant scenarios in Wakatipu has been the demise of developers because of New Zealand's "second-tier lenders" in the ailing finance company sector, which have been calling in debts in the face of $3 billion-$4 billion losses.
Also, the freezing of finance company investors' money during the past two years.
"The second-tier lenders are having to refinance themselves and are subsequently not continuing to support developers; sometimes in the middle of projects," Mr Nellies said.
The Real Estate Institute of New Zealand spokesman for the Lakes district, Adrian Snow, rejected the suggestion Queenstown's investment image was tarnished by the number of development company liquidations and mortgagee sales.
Queenstown was no worse off than Wellington or Auckland and in a better position than some places in Australia, which Mr Snow had recently visited.
"Developers and speculators are the hardest hit - it's very high risk by its nature.
"Apart from a downturn in 1998, post the 1987 [stock market] crash investors have forgotten how to be conservative to manage downward economic phases," Mr Snow said.
While Queenstown prices were on average down 15% during the past 18-months, the mortgagee sales were a "strong sales point" and were raising buyer interest in the Wakatipu basin.
Compared to other unrelated asset classes, a 15% property downturn was "relatively" small.
"Mortgagee sales have prompted a lot of calls from people with plenty of cash," he said.
Anecdotally, overseas interest was starting to "reappear" and rental yields of 6% on some properties were also an attraction, he said.
The Queenstown sales broker for commercial property specialists Colliers International, Mark Simpson, said while there was an "unfair perception" Queenstown's investment image was sullied, it was not across all sectors but, specifically, development land and apartments.
While speculators were now removed from the market, there would be a time when both development land and apartments became in short supply and the market would again move.
