The Queenstown property market is stabilising after sharp falls from the median sales price highs of autumn 2008.

"The Queenstown property market is very dynamic when compared to the main metropolitan areas of New Zealand," says national valuation company Telfer Young's Chris Stanley. "As a premium Australasian tourism destination, Queenstown's property values react quickly to changes in both the domestic and global economies, so it has a more pronounced "boom-bust" cycle than major New Zealand cities. But its unique location and national and international standing as a destination means a positive medium to long-term outlook for property in the greater Queenstown area."

Mr Stanley said Queenstown is currently suffering from an over supply in almost all property sectors but particularly in apartments, tourist accommodation and office space.

Residential market

"The median sale price for houses peaked in autumn 2008 at $594,000 falling through until mid 2009. The market then stabilised with the median price in late 2009 being $518,000, although sales volumes are still at low levels.

"The market for higher valued properties is subdued but there is good demand for lower priced property suitable for first home owners, and for premium properties.

Vacant residential sections and apartment prices remain relatively low by historical standards, Mr Stanley said.

"There has been a substantial fall in section values and a significant reduction in sales volumes. The apartment market has also gone through a price correction as well as a significant reduction in sales volumes, although there have been a number of mortgagee sales. Sales volumes peaked in the last 6 months of 2005 at 110 sales with sales in the last 6 months of 2009 totalling 25. The apartment market will also be affected by the completion of a number of developments currently under construction."

Commercial and Industrial property

There has been a substantial increase in development in the centre of Queenstown over the last two years creating a significant increase in supply of retail and office accommodation.

"As a result, office rentals have fallen as more office space has come onto the market at a time of limited demand. These new developments have added approximately 17000m2 to the total retail and office stock. Retail rents have also softened however not to the extent of the office market. New retail leasings in Queenstown have achieved net rental rates ranging from $780/m2 to $1225/m2."

Investment yields for commercial property have increased by around 1.0%.

Mr Stanley says that investor demand for good quality industrial property remains strong.

"Investment yields have eased, though, from the levels achieved at the market peak in early 2007."