The Government has announced a new blueprint for the way applications for the sale of rural land to overseas buyers are to be assessed.
Associate Finance Minister David Parker and Minister for Land Information Eugenie Sage have issued a new Directive Letter to the Overseas Investment Office which sets out the Government's policy approach to overseas investment in rural land.
Parker said the previous directive was too loose because it only applied to very large land parcels that were more than 10 times the average farm size.
"In practice this meant restrictions in sales generally applied to sheep and beef farms over 7146 hectares or a dairy farm more than 1987 hectares," he said.
"Today's announcement raises the bar for overseas investment in sensitive land by replacing the existing large farm directive, with a new and much broader, rural land directive, which applies to all rural land larger than five hectares, other than forestry," Sage said.
Parker said the new directive tightened how applications to purchase rural land were assessed to ensure authorised purchases provided genuine benefits.
"Too often we see investors buy a New Zealand farm and then use existing systems, technology and management practices which don't substantially add anything new or create additional value for our economy," Parker said.
"We want to make it clear that it is a privilege to own or control New Zealand's sensitive assets and this privilege must be earned.
"We campaigned on these changes and they won't come as a surprise to potential investors."
The new Directive Letter will come into force on December 15 and applications which were being assessed by the OIO at that date will be subject to the new regime.
All applications that were still being considered at that date would have the opportunity to make additional submissions under the new approach.
"This Directive Letter is the first step to strengthening the overseas investment regime," Parker said.
"We will be introducing legislation to ban foreign buyers of New Zealand's existing houses before Christmas, and other work to strengthen the Overseas Investment Act is underway."
The Directive Letter also sets out a separate regime for applications involving forestry land.
It directs the OIO to place high importance on increased processing of primary products and the avancement of the Government's policies, such as it ambitious tree planting programme.
"High quality overseas investment can certainly help us achieve this goal," Forestry Minister Shane Jones said.
"Forestry and the processing of forest products are significant sources of employment in our regions and we want to build on that to get more people into a sustainable workforce," he said.
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39 Comments
I suppose it's no different to properly investors, the ones that follow the fundamentals of if the investment can pay for itself are ok, but the ones that invest for capital gain are the ones that can come unstuck.
Farmers that farm for capital gain are always going to be putting themselves out there at risk, no point blaming the government when the policies are returned to sensible ones, and not ones that just suit speculators, that can never work long term anyway.
AndrewJ
Good point but known point
It isn’t news there’s much farm debt ( or even more household debt )
Banks have already been accommodating with farmers debt in NZ
These aren’t dust bowl Australian farms they are bountiful NZ farms
Any poor seasons won’t take forever to turn around like in Australia with its climate.
My former Chinese neighbour told me NZers undervalued the long term value of their superior agricultural land
with plenty of rainfall.
NZ can do better than sell off its ag land to foreigners on the pretext that only foreigners can provide capital investment to improve productivity.
Go Labour Greens NZ1st you won deservedly and Kiwis have a chance to grow past the old paradigm National offered.
PS small blocks aren’t worth farming they’re speculative investments
Been there done that
Now I’d better go feed the deer
Neighbour sold around 8ha block this month for $840k - going in to cherries. 2 blocks up another block was sold 4ha $540k - mix of lifestyle and 2ha cherries. Last two years cherry land has gone from $50k/ha to $100-$120k/ha. Grape growers (commercial) pay around $30k/ha. House sections here in last 3/4 years gone from around $100k/section to $240+/section. Not sure what prices in Central were 10years ago. But the biggest change has been in the last 2/3 years.
Down south farm dairy price now varies from 22k/ha - $40k/ha. 10years ago $32-35k/ha. 4 years ago it was more like $40-45k New proposed Water & Land Plan is making people very cautious where they buy and how much, if any, money needs to be spent on environmental/building upgrades. Lawyer says people may sign a farm up, and then do their due diligence on what physiographic zone the farm is in and at that stage she said a lot of deals are falling over.
Well it's not up %8500 like Bitcoin but still a pretty good effort. I take it returns have gone through the roof for cherries?
Talked to an Apple grower from Oregon, he was buying land at 6k an acre US while in Hasting it was going for as much as 95k a hectare NZ(Mind you he was planting 16k acres). Like I said, we fully price the future, lets hope it arrives in one piece.
It's quite volatile income wise Aj. They have had 3 exceptional years the last 3 years. Climatically everything went really well. Prior to that banks said to budget on 1 in 5 years being a really good year, and 1 being a zero income year. They now say 2 in 5 will be good. It feels like Cherries here at the moment are a bit like the heady days of goats/kiwifruit etc. They are air freighted and cargo space is the biggest issue facing any further increase in crop size. Pickers are the other one.
Here's a grudging acknowledgement from this crusty conservative that I think Parker and Sage have this one right. NZs weak policy on foreign ownership of farmland was over due for tightening. The Mark Mitchell led debacle on the sale of significant SI high country properties and thumbing of the nose at ordinary Kiwis over access, tipped me across on this issue.
Going to be interesting. Locally there's four small dairy farms for sale, 200-300 cows. That's about 400% more than normal and usually they are snapped up by neighbours before they even reach the agents. They certainly aren't prime candidates for overseas investors but there will surely be a flow on effect and they will have to drop their price if they want to sell.
There's definitely going to be some squealing but my sympathies for the industry ran out long ago.
yes redcows those small farms are going to be hard to sell as standalone farms now. Their viability unless you have substantial equity, is questionable now in times of volatile payouts. Though some of them may be suitable for horticulture? 400cow farms seems to be the 'first farm' size now in our area.
Hopefully for all existing overseas owned property that has its ownership changed will fall foul of the new rules.
That would mean of a family wishes to move ownership at arms length could not do so.
Also if the land itself is subdivided it could only be sold to a local owner.
Without thinking too hard i can count at least 5 companies listed on the NZX with the majority of shares owned off shore.
Is there anything in these new rules to stop them purchasing land,if not then they would seem to be a perfect vehicle to get around these laws.
"All purchases ... subject to Overseas Investment Office assessment"
Golly! The OIO will be busy! Good to know they've got our back. They had better order another barrel of ink, 3 more employees and a more rubber stamps.
What a hollow appeal to authority. How do we know the OIO are going to do anything?
This is huge.
Many young people in rural areas haven't been able to buy farms like their parents as foreign buyers have pushed up prices. This should bring the market back into balance where young locals can afford to buy. Brilliant move labour.
On the downside I wouldn't have wanted to have bought farmland in the last 10 years as negative equity could arise. Banks are also likely to take a hit with mortgages not fully repaid.
National ditched farmers long ago. With family farms on the way out, and an imported temporary workforce, why bother courting those rural votes when you can just gerrymander the electorate by importing Blue Dragons? Farmers don't appear to have entirely clued into this yet.
I'm not sure how wide spread it is but lately as well as buying farms there's been a number of 50/50 jobs handed over to syndicates of established farmers who then put on managers. I have no idea what their thinking is but with very few and getting fewer (saw Dairynz figures suggesting a nearly 20% drop in sharemilker numbers) sharemilking jobs around the effect on the much lauded progression available to young farmers is dramatic. Lately the standard of manager seems to have dropped dramatically with the best leaving, creating a number of complete and sad disasters locally.
Interesting red cows. Thanks. There is a farm near us for sale that has a company set up to take on 50/50 jobs contracted to run it, and does exactly what you say above, and with very similar results. This company runs the farm on a shoe string so it can get it's 'x%' return. Next to no maintenance has been done on the houses, the cowshed needs knocking down and starting again and the owners wonder why no locals are interested in buying it?........
It's not the foreigners causing problems for young kiwi farmers it's kiwi 'landed gentry'.
Who would of guessed that under National, only the really big blocks with a foreign purchaser were being looked at by OIO.
You can bet there are no figures for how many farms sold to foreigners. Our young farm workers get paid low rates and then couldn't even dream of competing on the world stage to purchase a NZ farm.
You don't buy a farm from salary/wages. You have to progress through from wages to contract milking/sharemilking to be in a position to buy a farm. Dynastic farming families and NZ investor farmers are the issue around us. We are one of the very few farmers in our area to only own one farm. Most of our kiwi neighbours are multiple farm owners, many with 3 or more farms. We have no foreign owned farms as neighbours.
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