Last December the Government issued a ministerial directive letter tightening rules on the sale of farmland to foreigners and from January to October this year there have been 11 sales completed, two declined and 16 withdrawn having started the approval process through the Overseas Investment Office.
For the same period last year, 24 applications were approved, none was declined and just one withdrawn.
In its latest market analysis the Real Estate Institute attributed less interest from foreign buyers at least in part for a 20% decline in land prices in the past year, especially for large South Island dairy farms.
The institute’s data also reveals a 10.5% drop in the number of farms sold in the year to October compared to the same period in 2017, especially grazing, dairy, finishing and arable.
Overseas Investment Office group manager Vanessa Horne attributed the reduced number of applications to the directive.
Institute rural spokesman Brian Peacocke said agents have noticed the release of capital to foreign owners from farm sales has slowed because of delays with the OIO process.
That has delayed investors buying new properties and when a property sale involves multiple or syndicate owners that delay is multiplied.
Any delays in the OIO process add to the costs incurred by prospective foreign investors and could account for some of the withdrawals.
A foreign buyer requires OIO approval for a shareholding of 25% or more in farmland.
Last year’s directive from Associate Finance Minister David Parker and Land Information Minister Eugenie Sage requires the OIO to put greater emphasis on job creation, the introduction of new technology or business skills, increased exports, increased processing of primary products and oversight and participation of New Zealanders.
For prospective investment in forests it directed greater weight be given for increased processing of primary products and advancing Government policy.
Underpinning the policy is the view that owning NZ land is a privilege and should provide extra benefits to NZ.
“This new directive ensures authorised purchasers will provide genuine benefits,” Parker said.
“Too often we see investors buy a NZ farm and then use existing systems, technology and management practices, which don’t substantially add anything new or create additional value to our economy.”
Horne said where overseas investors can show genuine benefits to NZ they can still get consent.
“New Zealanders are good at farming. If an overseas person plans to continue to operate a farm in the same way as a New Zealander it can be very hard for them to show any benefit to NZ.”
The data supplied to Farmers Weekly by LINZ reveals sheep and beef farms had the greatest decline from eight sales from December to October in 2017 to two for the same period in 2018.
The total gross area of sheep and beef farmland sold increased from 15,000ha last year to 41,600ha because of the sale this year of Canterbury’s 39,000ha Mt White Station, which was approved under the residency pathway scheme.
Horne says the buyer, Czech Republic born Lukas Travnicek, plans to live in NZ indefinitely so was not required to show any extra benefits for NZ.
Vineyards proved popular with three sales covering 170ha selling this year compared to four covering 398ha last year.
The interest in dairying appears to have waned with just one farm selling in each of the two years under review.
Three kiwifruit orchards sold last year but just one this year.
Horne says applicants can withdraw from the OIO process at any time and that can be in response to being issued with a proposal to decline by the office.
“The increase in the number of withdrawn applications between the two periods can largely be attributed to the ministerial directive letter, which raised the bar for people buying rural land,” she said.
“Some people could see that their applications would not meet the new tests so decided not to proceed.”
