The Government has announced stricter tests for New Zealand’s overseas investment regime to further limit the sale of rural land to foreigners, with Associate Finance Minister David Parker saying Kiwis should be prioritised over “a one per center from overseas”.
Parker has conceded the move may drive down the sale prices of some farms “on the margins”, but believes any effect will be minor.
A new directive letter issued to the Overseas Investment Office will tighten rules around the sale of all rural land larger than five hectares other than forestry.
Parker said the existing directive for large farmland was “very permissive” and only applied to farms more than 10 times the average size.
Parker said the new directive would tighten the assessment of overseas investment to ensure there were “genuine benefits” for New Zealand.
“People who commit themselves to New Zealand, pay tax in New Zealand, they’re the ones who should have first bite at buying our land assets.
“We think that impediments to share milkers graduating to be farm owners are wrong, and they shouldn’t be effectively prevented or blocked in their progress in life from a one per center from overseas bringing their wealth from a low-tax jurisdiction or from countries that have got far higher rates of inequality than we have.”
Asked whether he expected the changes to affect farm prices, Parker said there could be some change “at the margins”, although he did not expect significant changes.
“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 on price 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.”
Parker said the changes were an “interim” approach while the Government developed permanent changes to legislation.
Land Information Minister Eugenie Sage said the new directive would come into effect from December 15, with all applications being assessed by the OIO at or from that date subject to the new rules.
The OIO now had 33 staff, a “significant increase” from the 13 it employed during the 2016/17 financial year, which would help to deal with an increase in applications.
However, Parker said the new approach was unlikely to have a long-term impact on the workload of the OIO.
“Over time the workload of the Overseas Investment Office is likely to decrease rather than increase … [the law changes] will narrow the gate through which applicants can pass, but once they are through the gates, the processes will be faster.”
Applications which had not been determined by then would be given “a fair opportunity” to make additional submissions under the new approach.
The Government has exempted the forestry industry from the changes, but introduced a separate directive to encourage domestic processing of wood.
Federated Farmers has welcomed the changes, with vice-president Andrew Hoggard said the Government had struck a balance between ensuring foreign buyers benefited New Zealand while not “closing the door” on investment in the primary sector.
“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,” Hoggard said.