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A glut of apartments is expected to swamp the Queenstown property market over the next few years.
Real estate agents believe the problem will become worse as overseas buyers stay away because of high property prices and the soaring New Zealand dollar.
Up to 250 apartments are on the market in Queenstown, and more than 1000 new apartments are expected to be listed in the next few years.
But the number of overseas buyers has fallen from 50 per cent two years ago to about 20 per cent during the past year.
Real Estate Institute Queenstown spokesman Adrian Snow said properties were not making the returns buyers expected. Some buyers had lost hundreds of thousands of dollars on investments which had declined in value within the space of a few years.
"You are right in using the word glut," he said.
Sales volume in the resort town had dropped by about 60 per cent in February, compared with the same time last year.
At a "loose estimate" there were 250 apartments for sale in the resort, he said.
Developer Dave Henderson, whose Five Mile Village could include up to 800 apartments, agreed there was an oversupply, but said it was of over-priced, "poorly considered" apartments selling for about $700,000.
Mr Snow said although real estate agents did not want to speak out, they were nervous about what would happen when more apartments became available.
Most apartments in Queenstown were managed and owners stayed for only two to four weeks a year. The rest of the year, they sought rental returns.
Developers had sold straight to buyers, including overseas investors who expected large rental returns, he said.
The problems came when developments did not live up to what investors expected and people tried to sell.
Mr Snow had heard of one mortgagee sale of an apartment bought for $2.7 million three years ago, and said he would not be surprised if there were more sales.
