The Queenstown Lakes District Council has recorded a loss of $6.1 million, but ratepayers will not be affected.
The council's annual report shows a fall of $16.9 million in the value of its investment property produced an overall loss of $6.1 million for the 2008-09 financial year to June 30.
The council had budgeted for a $31.5 million profit.
Council finance manager and deputy chief executive Stewart Burns said property values plummeted during the year because of the recession.
However, he said ratepayers would not be affected by the loss.
"It's not a realised loss because we have not actually sold the properties and we have no immediate plans to do so."
The value of council investment property had dropped about 23% in the past two years, with a fall of $6.8 million in 2008, he said.
Council investment property included the Lakeview site, the Commonage and Scurr Heights land.
The effect of these unrealised losses on the council's bottom line for the year was significant.
Had they been excluded, the council would be reporting a surplus of $11.4 million, he said.
"The requirement for all councils to have these assets re-valued at each balance date means our bottom line can be significantly affected by swings in the market," he said.
International accounting standards require local authorities to revalue assets annually.
No development was planned for any of the council's investment properties until the market had recovered, he said.
The council announced in August it had put the Lakeview project on hold.
The project aimed to develop council-owned land in Man St in central Queenstown, formerly part of the Queenstown camping ground.
Council chief executive Duncan Field said council revenue was $7 million below budget.
Development contribution income came in at $8.1 million below budget, the result of a slowdown in consent-related activity.
Operating expenditure was $8.6 million over budget.
The council, the Queenstown Airport Corporation, Lakes Leisure Ltd and Lakes Environmental Ltd had a combined operating loss of $4.3 million.
