The Flyer used to be the pride of Kingston, but now it rots in the rain.

The steam train was the symbol of the small town on the southern tip of Lake Wakatipu, where fog creeps from the surrounding mountains and descends like smoke, hanging above a long, stony beach.

While the train slides further into decay, expansion plans for the community are enormous. Huge demand for housing in Queenstown, which is quickly becoming hemmed in by its geography, is putting responsibility on towns such as Kingston to ease the pressure.

Its 200 houses may soon become 1100, based on a private, billion dollar development consented behind the township, which would all but swallow the town.

The Kingston Village development includes 740 residential sections, a school, and an upgrade to the local golf course. It has been granted resource consent, and last year the local council received millions in funding from the former National government to improve the area's infrastructure, to make way for such a development.

The Kingston Flyer behind a fence, where it's no longer in use. (ALDEN WILLIAMS/STUFF) The Kingston Flyer behind a fence, where it's no longer in use. (ALDEN WILLIAMS/STUFF)

High above the road leading to Kingston, the steep tussocks of Glen Nevis Station look over the lake. The farm had been owned by one family for many decades by the time it entered tenure review in the early 2000s.

It was one of the first reviews to proceed under the new legislation set in 1998, and for critics of the process, became evidence-in-chief for its flaws.

The offer privatised land high on the face of the Hector Mountains, which had significant natural values - a covenant allowed grazing at an altitude of nearly 1700m, too steep to construct a fence to stop sheep wandering onto adjoining conservation land.

An earlier report by DOC staff had said there was little economic use for land at that altitude, and its natural features were of "the highest value", but it was privatised anyway, seemingly to get an agreement with the leaseholder.

While most of the farm was kept by the Crown, the rest - with a market value around $2m - was sold back for $75,000. The farmer quickly on-sold the station for just short of $5m to Kingston Village Ltd, a subsidiary of Australia-based property developers Goodman Holdings.

The Goodman family, from Nelson, is collectively worth more than $1b, according to the NBR's Rich List. A paddock across the road from the station - which was not included in the review but had been added to the property, likely through a deal long ago relating to construction of the main road - is the site for the proposed development, which would permanently change the town and has potential for enormous capital gain.

Lake Wakatipu, as seen from Glen Nevis Station. ALDEN WILLIAMS/STUFF Lake Wakatipu, as seen from Glen Nevis Station. ALDEN WILLIAMS/STUFF

What happened at Lake Wanaka is starting to happen at Lake Wakatipu, the long, narrow lake shaped like a backwards 'S' with Queenstown at its centre.

The lake’s water levels rise and fall in 20 minute intervals, a phenomenon local Māori likened to a heartbeat; as the legend goes, the lake is a fallen giant from the mountains, slain by a warrior who set it alight, filling its body with melted ice and leaving only its heart unscathed, forever beating in the water's depths.

Today, luxury housing dot the fringes of the lake, filling out the forested edges above the winding road to Glenorchy and the town beyond, appropriately called Paradise.

The northern stretch of Wakatipu has become symbolic, in many ways, of the social and physical evolution of this part of Otago. What used to be sprawling sheep farms is now dotted with luxury lodges and Hollywood film sets; wilderness replaced with exclusive developments, glistening mansions on land that used to be desolate and remote.

Shortly before Glenorchy, there is a lakefront terrace beneath the winding trails and rocky outcrops that form the town's backdrop that is home to one of the country’s most exclusive properties.

It used to be part of a farm called Wyuna Station, which looks like an American ranch you might see in a state like Montana; craggy mountains form an amphitheatre around the lake, and trails for horse riders unfurl into the steep country which used to be a major source of scheelite, a deep red mineral often found set in jagged crystals. When Robert Redford, Hollywood’s nostalgic archetype of the American cowboy, visited Wyuna he reportedly said it was "the way America used to be".

The farm is part-owned by American Tom Tusher, a former top-ranking executive at Levi Strauss. He bought the farm ostensibly because it surrounded Blanket Bay Lodge, which he had opened several years earlier after purchasing the land in the 1970s for a reported $21,000.

When it completed tenure review, Wyuna Station was about one-fifth its former size - most of its land went to conservation, for an area known now as the Whakaari Conservation Area - but its most valuable section, a flat terrace perched over the lake, was privatised.

That terrace is now Wyuna Preserve, one of the country's most elite developments.

A mansion in the gated community was recently put on the market for $33m, one of the most expensive properties ever sold in New Zealand. There are 30 lots in the subdivision, 21 of which have been sold; The cheapest sections sell for around $1m, the better ones for up to $4m, in a gated community with the tagline, "You've earned your lot in life".

As demand for property has grown, there has been a sudden uptake for land at Wyuna. Among those who have bought there recently are an Amazon executive, a Swedish entrepreneur, a cosmetics boss and an Australian private equity magnate, property records show. Sales don't need approval from the Overseas Investment Office, a fact prominently stated on the development's website. Several sections appear to be owned by intermediaries, concealing their true ownership.

The leaseholders paid the Crown a net $630,000 for the land, the most any leaseholder has paid in any tenure review. It has, however, been lucrative – the land has been onsold for upwards of $20m.

A property at Closeburn. ALDEN WILLIAMS/STUFF A property at Closeburn. ALDEN WILLIAMS/STUFF

Wyuna Preserve has competition for the high-value dollar, just up the road. Earlier this year, New Zealand's richest man, Graeme Hart, paid $24m for a sprawling mansion at Closeburn Station, about 15 minutes from Queenstown.

His home has six bedrooms, a library, a gym, a day spa, and no fewer than seven chimneys: the empty section had been bought for $3m in 2012 by the family of an Australian businessman, who built the mansion before selling to Hart for significant capital gain. The family has since bought a section at Wyuna.

It is one of 27 sections in the development, and those who buy there get an equal share in the farming operation. Among Hart's neighbours are an American plastic surgeon, a Singaporean polo player, and a high-ranking bank executive; former residents include an Oscar-nominated film producer and a high-profile Singaporean politician.

Around 60 per cent of its residents are foreigners.

Many years ago, Closeburn Station was an unremarkable farm on a corner section, where the road to Glenorchy swings north. It was small, cold and dark, with a history of dubious management; its icy hills blocked the sun from the north, casting long shadows over the rolling tussocks. It is likely familiar as the filming location for the final scene of Lord of the Rings: Fellowship of the Ring, in which the fellowship splits up after a chaotic battle with orcs on a shrouded hillside forest.

ALDEN WILLIAMS/STUFF ALDEN WILLIAMS/STUFF

The farm did, however, have premium views and a rare landscape. Today, the mansions at Closeburn are hidden beneath thick trees, peeking over the ridge line for views of the lake and the Remarkables.

In the early 1990s, the right to lease Closeburn was bought in part by David Broomfield, a local developer, who had wanted to protect the land.

He had no knowledge of the slowly emerging tenure review process at the time, but Closeburn became one of the first to sign up. About three-quarters of the property went to the Crown, leaving the valuable lake-front land as freehold, which was bought for around $200,000.

What had limited value as a cold, icy farm had enormous potential for luxury housing, Broomfield soon found.

"We pitched it for the top 10 per cent of the market," he says.

"The amount of money, in the way of development – both for the station and for the housing on it – is at a far higher standard than the average Kiwi could live.

"I don't live there any longer. The annual fee is $27,000 a year, to put it in perspective."

Hart's two sections, bought for $24m, represent a fraction of capital gains well over $50m, realised by owners who bought bare land, built houses and on-sold, all from an unprofitable farm largely disposed of by the Crown.

Around the same time the $33m mansion was put on the market at Wyuna Preserve, a property at Closeburn was put up for $12.5m. Another property has since been listed for $8.6m, and another is on the market for $6.5m.

While it has allowed for luxury housing, the landscape has been protected through covenants, Broomfield says, and the land is better managed than it had been under a Crown lease.

"I'm very proud of it," he says.

"I call it a success and it's a yardstick to the way a lot of these stations and rural land could be managed in the future.

"It was a passion. You have to be emotional in a development like that, and it takes time. It's not a quick flick or anything like that, like a lot of developments.

"Not many people understand or can really see what [tenure review] has achieved, especially for the country in the way of money."

A sign on an exclusive, gated community near Queenstown. ALDEN WILLIAMS/STUFF A sign on an exclusive, gated community near Queenstown. ALDEN WILLIAMS/STUFF

There is one more station separating Wyuna and Closeburn, which may soon begin development of its own.

Mt Creighton is undergoing tenure review now, and based on its substantive proposal, which has been accepted by the leaseholder, around 5000ha will be privatised and 10,000ha conserved.

It would enable significant new public access, including the proposed Moonlight Trail, which has been mooted to join DOC’s Great Walks.

But much of the land to be privatised is lake-front, and the station’s lessees - a group of mostly American investors, among them a venture capitalist and a former ambassador - already have consent to build a sprawling, private mansion with a nearly 1-sq-km footprint.

It would mean all of the Crown-owned stations on the road to Glenorchy would have privately owned lakefronts, reserved for the dwindling few who can afford to pay.

While approving consent for the mansion at Mt Creighton, the hearings commissioner said its size meant it could, at some point, be turned into a lodge.

Luxury lodges have become a hallmark of the high country, even on land that is still owned by the Crown.