Farm sales overseas to get harder

"The existing directive from 2010 is very weak.''

Minister for Land Information Eugenie Sage

Any sale of more than five hectares of land to a foreign buyer will have undergo scrutiny by the Overseas Investment Office before it can be approved.

It is a major clampdown on the sale of farmland to foreign interests and syndicates, which Minister for Land Information Eugenie Sage said was necessary to ‘‘raise the bar for overseas investments in sensitive land’’.

‘‘The existing directive from

2010 is very weak and it undermines the criteria in the Overseas Investment Act,’’ she said. It generally only applied to sheep and beef farms of more than

7000 hectares.

The new directive put a greater emphasis on ‘‘the importance of jobs, new technology and business skills, increased exports, processing of primary products and oversight and participation of New Zealanders’’, said Sage.

Significant carve-outs remain for the forestry industry however, signalling a need for overseas investment under coalition plans to boost the industry and to plant 1 billion trees.

Associate Finance Minister David Parker said he did not believe it would significantly affect the price of farms but logic dictated foreign buyers were inflating the price of some farms.

‘‘The only reason that a New Zealand seller sells to a foreign buyer, rather than a New Zealand buyer, is that they’re willing to pay more.

‘‘So it’s axiomatic that they have some effect on price. How large that effect is no-one really knows but it is absolutely clear that every time an overseas buyer buys a farm we are, at one level, frustrating the ambitions of a New Zealander who would otherwise buy that property.’’

Landcorp recently accepted the offer of a New Zealand bidder for a major Jericho Station in Southland but only as a back-up offer in the event a Chinese buyer’s application to the Overseas Investment Office (OIO) falls through.

The state-owned enterprise has been under fire for accepting the Chinese bid of $8.7 million, although the New Zealand bidder offered several hundred thousand dollars less. The Chinese offer was conditional upon OIO approval, and the New Zealander’s cash offer was unconditional.

‘‘We believe it’s a privilege to own New Zealand land, including our rural land. And we shouldn’t just be selling it willy-nilly to overseas buyers,’’ Parker said.

‘‘The current directive to the Overseas Investment Office, about how they balance the competing criteria that is set out under the Act regulations, is very permissive,’’ he said.

‘‘It effectively instructs the OIO to look favourably upon purchases of farms up to 10 times the size of an average farm. It effectively means only very large farms are looked at seriously by the OIO, and we just think that’s too lax.’’

New Zealand taxpayers should have ‘‘first bite’’ at buying New Zealand land, and impediments to sharemilkers graduating to be farm owners were ‘‘wrong’’, Parker said.

Federated Farmers has welcomed the move, saying it appeared to achieve balance by toughening requirements on the sale of productive land without shutting the door on overseas investment.

‘‘If we’re going to have rules that the sale of productive land to overseas buyers should bring employment, public access, additional development or other benefits over and above those a domestic buyer would bring, they should be robustly applied.

‘‘Follow-up checks need to be made that undertakings given actually happen,’’ Federated Farmers vice-president Andrew Hoggard said.

Fish & Game chief executive Martin Taylor said the organisation also supported the change.

‘‘There is frustration among the outdoor recreation sector that the OIO under the previous government was effectively allowing the privatisation of our wild places and that has been hurting the average New Zealander.’’

The new directive will come into force on December 15 and will apply to all applications being assessed by the OIO at that date and onwards.