Lord of the Rings effect wearing off

Interest in luxury property in scenic locations in New Zealand, fuelled by the success of the Lord of the Rings films, is facing a downturn.

One high profile multi-million dollar property development, near Taupo, is up for sale due to financial pressures. The Kinloch Golf Course, bearing the name of golfing legend Jack Nicklaus, and surrounding properties are being sold under mortgagee instructions.

Property prices in popular resort areas like Queenstown and Nelson are also on the slide. The outlook for large-scale luxury property developments is particularly worrying and more mortgagee sales are likely as financiers cut their losses, it is claimed.

The root of the problem is the global credit crunch. The sector's rise was fuelled and underpinned by overseas investors, mostly wealthy Asians and Americans who eyed New Zealand as a cut-price paradise.

But right now Middle-class baby-boomers in the US can no longer afford luxury properties abroad. Internationally their dollar - which means their buying power - is at rock bottom. So New Zealand, with property prices still near the top of the cycle, just isn't looking cheap.

But it could mean bargains ahead. There is still considerable interest in Queenstown from Australian buyers. 'The well-being of our economy relies more on the well-being of the Australian economy than it does on the New Zealand economy,' said Queenstown Lakes District mayor Clive Geddes.

'The single largest group of visitors who come here are Australians, and they are also very active in purchasing retirement and holiday homes,' he added.

John Darby, the developer behind a multibillion-dollar resort settlement at Queenstown's Jacks Point, believes that while the property market nationally has slowed, Queenstown is poised for continued growth.

'All indicators suggest that demand for property in Queenstown, both as permanent residences and holiday homes, is going to remain high. The lifestyle offered in Queenstown and the sheer beauty of the area means it is a place that people are always going to want to be a part of,' he said.

'There is a slow down in the country as a whole and we're waiting to see what effect it will have here. Undoubtedly the upper end of the market will be worse off,' said Bill Dolan, chief executive of the Queenstown Chamber of Commerce.

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