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Sand Fly Beach New Zealand Sand Fly Beach is located on South Island, New Zealand just outside of Dunedin, near Otago Harbor. I made the mistake of thinking the name came from those annoying little sandflies, ah ha not so, the wind blows constantly and the sand really flies..hence the name. This beach is also home to the very rare and elusive Yellow-Eyed Penguin. It is worth the trip to see the penguins if you are ever in that neck of the woods.