30 Nov 2017

Foreign buyer changes cause debate over land prices

3:36 pm on 30 November 2017

The governent's tightening of foreign investment in New Zealand farm land is causing some debate over whether or not it will lower land prices.

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Young Farmers says prices could drop which is a good opportunity for newcomers. Photo: RNZ / Russell Palmer

From mid-December, overseas buyers wanting more than five hectares of rural land will have to prove they will deliver tangible benefits to the country.

Finance Minister David Parker said the change would not drop farm values because foreign buyers only cause land price increases at the margins.

However, the National Party and the Young Farmers advocacy group said the changes would affect land prices.

Young Farmers chief executive Terry Copeland estimated prices could drop by up to 10 percent, and said that provided a good opportunity for newcomers.

"If we can achieve that from a young person's perspective that would be awesome," he said.

"Obviously the other side of the coin is the existing farmer who is wishing to exit or retire loses that capital gain.

"But I think farming needs to shift so that the goal isn't capital gain on investment of the property, but a return per hectare so that farm then becomes more profitable so we actually get more young people wanting to get into the industry."

Mr Copeland said the traditional pathway into dairy farming through working first as a sharemilker, then owning a farm, has dwindled significantly in the past 10 years.

"The vast value of the land is prohibitive. There's cautious optimism that if land prices come back a bit those opportunities come back again."

Canterbury farm consultant and property valuer John Ryan said foreign buyers tended to focus on iconic properties, such as big stations, which in terms of productivity were extremely inflated.

He doubted the government's changes would have any impact on farm prices.

"Let's be honest, the foreign buyers operate at a level well above the local buyers - there's no doubt about that.

"If those prices disappear out of the market I don't think rural New Zealand will lose any sleep over it whatsoever."

Mr Ryan was critical of the Overseas Investment Office though.

"In my personal involvement with them I was very concerned at the quite limited rural and farming expertise that seemed to be involved at analysis and decision-making level.

"The decision-making seemed to be made in Wellington by career civil servants, most of whom did not appear to have a background in agriculture."

There are currently genuine local enquiries for farms in Canterbury, he said.