Successive governments in New Zealand regularly announce that the sale of rural farming land should come under increased scrutiny when the buyer is from overseas.

Land ownership / overseas investment rules for non-Kiwis

Currently the rules governing this are provided under the Overseas Investments Act 2005, and the Overseas Investment Regulations 2005, and a Ministerial directive issued in 2010 to the Overseas Investment Office (OIO). One of the main features of these rules are that an overseas investor can only gain approval where the investment is substantially and identifiably of benefit to New Zealand. Until now it only applies to “large areas of farm land” which is defined as land owned or controlled more than ten times the average farm size for the relevant farm type. This effectively introduces sale restrictions of farms over approximately 2,000 hectares (in the case of dairy), or 7,000 hectares (in the case of sheep and beef farms).

Forestry land is specifically excluded, but virtually any agricultural, pastoral or horticultural land is captured under the legislation. Lifestyle blocks may come under special consideration, but the farm does not have to be an economic farming unit or even part of one.

Consenting complications and procedures

Beyond compliance with the foregoing rules, vendors are required to offer farm land on the open market to domestic purchasers, before any consent can be granted to a foreign investor. Such approval is provided only by Ministerial consent, which probably means the Minister for Finance, and the Minister for Land Information. Changes coming into force in 2017 have seen the issuing of a “Directive Letter” by government ministries to the OIO. The government has been reported as stating that whilst the Directive does not change the rules regarding acquisitions of significant business assets, it does explain the policy approach to overseas investment in rural land. The most significant change occurring was that the existing “large farm directive” applies to all rural land larger than 5 hectares.

There is a great complexity of conflicting interests here. On the one hand, vendors can hardly be blamed for wanting to maximise their sale price since the inclusion of overseas investors results in an enlarged pool of buyers. From an economic point of view, they have little interest in tightening the rules. Others (including a recently reported politician) think that it is simply none of the government’s business who is buying land. On the other hand, the broader community interest probably sees the abhorrence of large tracts of land in Aotearoa New Zealand falling into the hands of overseas interests. Some people perceive this as an unsustainable practice resulting in the awful possibility of large numbers of New Zealanders becoming tenants in their own country.

Jobs, skills shortages and social dislocation

Another perspective is that New Zealand has a strong economic interest in attracting foreign investment, especially that which ultimately brings in new value-added industries, new technology, or new systems and skills. Perhaps most importantly, jobs for New Zealanders. Against this is the potential for social dislocation due to conflicting cultural and social conventions. Furthermore, there is no guarantee that capital gains that may be achieved over time would be ultimately reinvested back into New Zealand – in fact, it could be argued that New Zealanders themselves end up paying more in the long run when re-acquisition occurs.

The balancing act for governments

The reality is that governments are faced with a careful balancing act to ensure that whatever rules are adopted carefully weigh the rights of individuals, against the greater good of the wider community.

The issue was highlighted by the sale of the world-famous Cambridge Stud to wealthy plastics entrepreneur Brendon Lindsay. The vendor, New Zealander Sir Patrick Hogan, was himself reported to have been relieved that the buyer was another local. Many New Zealanders will be equally relieved to discover that under rules noe introduced, the sale of “iconic” New Zealand properties such as this will now more clearly come to the attention of the OIO.

This change in direction should not come as a great surprise since a good deal of discussion was engendered around this topic at the time of the past few elections. Nonetheless, over time the move has generated its fair share of public comment. It is clearly a sensitive issue that probably goes to the heart of many New Zealanders, regardless as to whether they are involved in primary production or not.

Land ownership - a sensitive and cultural issue for all New Zealanders

But there is nothing new in all of this. Land has always been, and probably always will be, a sensitive issue in Aotearoa New Zealand. After all, even after 183 years we are still resolving land ownership issues dating back to the 1840 signing of the Treaty of Waitangi – an understandably highly sensitive and contentious bicultural issue for many New Zealanders, both Māori and Pākehā. In fact, current critics of the changing arrangements may well spare a thought for Māori whom were not only in many cases tricked into selling their ancestral homeland well below market value, but were often forced to do so and at times even dispossessed completely without any compensation. Thankfully some progress has been made here over recent years.

So, I for one am appreciative that the current arrangements pull the whole question of foreign ownership of land in New Zealand into sharper focus. This is aside from any complication lurking within Trans-Pacific Partnership Agreements and the like which certainly has potential to impact the Overseas Investment regulations.

Conclusion

The matter of foreign land ownership in New Zealand is a very important subject deserving healthy and ongoing debate, and one rightly remaining a topic of interest to all kiwis. Our legacy for future generations will depend upon us continuing to make the right decisions.