Saturday, March 2, 2024

Stricter foreign investment rules met with cautious optimism

Neal Wallace
Changes to rules that allow foreign investors to buy farmland for conversion to forestry, will affect about 20% of property purchases, a recent study shows.
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While welcoming the changes, Beef & Lamb NZ chief executive Sam McIvor says at $80 a NZ Unit, carbon trading is still the biggest threat to farmland.

Changes to rules that allow foreign investors to buy farmland for conversion to forestry, will affect about 20% of property purchases, a recent study shows.

While welcoming Government plans to change Overseas Investment Act (OIA) rules, farming leaders say it doesn’t address soaring carbon prices, the underlying driver of farmland conversion to forestry.

The Government intends changing the OIA to require overseas investors buying land for conversion to production forestry to be subject to a higher approval process.

At present applications are considered under a streamlined special forestry test.

Associate Finance Minister David Parker announced today that these applications will now be subject to the higher standard Benefit to NZ test, the same test required for any land purchase by a foreign investor.

The special forestry test will remain for foreign investors wishing to buy existing production forests.

The Government move was welcomed by Beef & Lamb NZ chief executive Sam McIvor, but he warned with carbon trading on the Emission Trading Scheme this week at $80 a NZ Unit, the financial incentive remains for farmland to be converted.

“The fundamental issue and a big driver for farmland to be converted to production forestry, is the ability of carbon emitters to offset 100% of their emissions through the ETS,” McIvor said.

NZ is the only country in the world with an ETS that allows emitters to offset all their emissions.

He said he wants the Government to act.

“Every day they do not do something but fiddle around the edges, rural NZ burns,” he said.

A report earlier this month on forestry, land-use and carbon by former Hastings mayor and MP Lawrence Yule for B+LNZ and 15 councils, highlighted the threat of land-use decisions driven by the carbon price.

Yule’s research revealed 14,000ha of sheep and beef farmland was bought for conversion to forestry in the first half of 2021.

Discussions with real estate agents show that the total area of livestock farmland bought in 2021 for conversion to forestry will exceed 36,000ha, more than was bought in 2019.

McIvor said Yule will now look at creating policy solutions that will enable a more strategic approach to forestry.

Data from the Overseas Investment Office reveals that from 2018 to 2021, 40 sales covering 36,000ha of sheep and beef farmland were made to foreign investors.

Of the 36,000ha, 23,000ha was planted into new production forestry with the rest left as indigenous vegetation, existing forestry or the subdivided and sold.

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