Southland has displaced Otago to take first place in the latest ASB regional economic scoreboard - underpinned by growth in tourism, house prices and strong rural economy.
Otago dropped from first place to seventh-equal, out of a total 16 regional council areas across the country, while Southland shot up from eighth place to first, said ASB chief economist Nick Tuffley.
“The Southland housing market is hot, with the highest annual sales growth in the country,” he said.
The result was not so much that Otago had taken an economic nose dive, but it had increasing capacity constraints when it came to accommodating tourists, that also spilled over into housing for people, he said.
“The issue is tourism capacity constraints around Queenstown, that is causing an overall drag in Otago,” Tuffley said.
Underpinning Southland's improved performance was it having the highest annual house sales growth, and also house price growth, plus Southland's guests nights growth for the year to September was 10%, while Otago had notched up just 1% growth.
“Tourists are obviously discovering the regions hidden gems, such as Te Anau, with the region also leading annual guest nights growth,” he said.
It may be that Southland had benefitted from an over-flow of tourists seeking accommodation there, after finding it difficult in Queenstown or elsewhere in Central Otago. Several aspects of Southland's economy were definitely playing out in its favour, he said.
There had been good spring growing conditions, the Mycoplasma Bovis situation was looking more positive and lamb prices had been setting record highs.
“There was no holding Southland back this quarter, with the rural sector outlook also improving,” Tuffley said.
According to one Queenstown-based tourism operator, accommodation in and around Queenstown had become a “pinch point” this year which had stymied growth.
Tuffley said not only was there a lack of tourism accommodation growth, but also a lack of affordable houses to buy and a lack of rentals, which was making it difficult for the local workforce and families.
“There's a pocket of expensive property radiating out from Queenstown - some people are making a decision to commute from Cromwell,” he said.
In several areas Otago was still doing well, with employment growth “strong,” house prices “good” and a 2.2% population growth gain was second only to Auckland.
Conversely, Tuffley highlighted that Otago building consents had fallen considerably, and was second only in percentage decline to Canterbury, where applications were easing off as the earthquake rebuild comes to an end.
Canterbury slipped two places to come last in the 16 regions, with Auckland second last, with its economic “rebalancing” continuing to be gradual.
Tuffley said while Canterbury had an healthy 2% rise in population, it was the only place in the country with declining job numbers, and CBD construction was “lumpy,” given differing finishing timetables.
“The outlook for the region's export sectors remains healthy and, with the exception of Akaroa, the tourism sector in particular has ample capacity to grow,” Tuffley said.
*Simon Hartley is senior business reporter and assistant chief reporter for the Otago Daily Times.