(Bloomberg) -- Move over Sydney and Auckland, there's a hotter property market in the southern hemisphere and it's only 1,500 miles from Antarctica.
In Queenstown, New Zealand's adventure tourism mecca and playground for the rich and famous, house prices rocketed 31 percent in the year through September to an average price of NZ$959,000 ($690,000). That's twice the 15 percent rate of increase in Auckland, the nation's largest city. In Sydney, prices climbed a mere 10 percent.
Queenstown, deep in New Zealand's southern alpine region, has become one of the nation's most unaffordable places as more buyers depart the overheated Auckland market, where prices have almost doubled the past nine years. The central bank's steps in 2015 to curb lending to investors in the northern city spurred many to look elsewhere while other home-owners have taken advantage of surging values by selling, or refinancing amid record-low borrowing costs, giving them the cash to look south.
Aucklanders "can get equity out of their homes more easily than they could five years ago,'' Gail Hudson, a Queenstown realtor, said in an interview. "They’ve seen it as an opportune time to take some money out and buy here.''
The average house price in Auckland rose to over NZ$1 million in August, according to Quotable Value New Zealand. Prices have also soared more than 20 percent the past year in the North Island cities of Hamilton, Tauranga and Wellington as investor demand spilled out of Auckland.
New Zealand's central bank last year responded to soaring Auckland prices by requiring investors to have a bigger down-payment for a mortgage. It's now applied such limits to investors nationwide, but it remains to be seen whether the rules will impact on Queenstown, which is second to Auckland as the most unaffordable center in the country, according to Massey University's Home Affordability Report.
While stricter deposit requirements could deter buyers, the university said cheaper borrowing costs could still push house prices higher around the country, and continued demand from a growing population and offshore investors, "could lead again to a deterioration in housing affordability as we move into the summer period.''
Queenstown's chilly winter temperatures and occasional polar blasts aren't discouraging buyers, who are attracted to the area's ski fields, award-winning vineyards and championship-quality golf courses. Many of Hudson's clients are from Auckland, while the local airport's direct links to Sydney and Brisbane also make it popular with Australian buyers.
"People like coming as tourists and they enjoy living in this part of the world because of all the outdoor attractions,'' said Hudson. ``It's a pretty spectacular place.''