That is a finding in Colliers International's "2019-20 Otago Market Review and Outlook".
After an unusually prolonged period of growth, the report says there are signs the residential property market is taking a breather.
Signs include "lower sales volumes, vendor expectations moderating and prices stabilising".
Prices remain firm in central Queenstown, due to limited demand and the effects of rezoning, the report says, but values in developing suburbs "may come under downward pressure as further supply is introduced".
Report co-author, Colliers Queenstown valuer-property consultant Heather Beard, states: "We're moving into a period where there's going to be less value appreciation."
Fellow author, local Colliers valuation director John Scobie, says prices will still remain high because interest rates "are still looking pretty low".
He points out rates were about 5% when a lot of the current housing stock was built, yet "now you can get one-year money for under 4%".
"There is still plenty of demand in the market driven by tourism, the area's growing population and the ongoing construction boom - but we are now expecting any further growth to occur at a more moderate pace than we've seen in recent years."
The report states: "Overall, the balance of power is expected to shift to purchasers in 2019-20."
Signs include auction clearing rates continuing to slow, and homes, especially those priced over $1million, taking longer to sell.
A spin-off for workers, the report says, is that rents have reached "an affordable ceiling".
It adds: "No significant further growth in rents is expected this market cycle."
In fact, there could even be pockets of rental oversupply in newer subdivisions, posing a risk to people relying on rental income to pay their mortgage.
The report also notes there has been a drop-off in sales of higher-value properties, due to the ban on foreigners buying residential property.
However, it notes other sectors - commercial, retail, industrial and tourism-related property - are all performing well, especially town centre retail and commercial, and Frankton industrial.
Factors such as expected population growth, ongoing construction activity and tourism continue to underpin values and rents in those sectors.
It notes commercial space at Frankton - focused more on residents than visitors - has trebled in the past five years.
However "the completion of further space may result in vacancy rates increasing".
Tourism property remained strong despite annual growth in guest nights slowing.
Occupancy rates had levelled off, partly due to "thousands of homes, units and rooms [on short-letting platform Airbnb] competing with hotel, motel and backpacker accommodation".
It suggests "only some of the several proposed hotel developments in Queenstown are likely to complete due to the difficulties presented by planning complexities and build costs".
"High prices paid for hotel and apartment development sites in Queenstown will further challenge the viability of proposed developments."
Some areas of the tourism market are also flattening, the report says.
It states a reduction in tourism numbers from our largest visitor source, Australia, due to its weakening economy, is potentially the greatest threat to Queenstown's property market.
- Philip Chandler
