24 Feb 2022

Forestry rule changes for overseas investors planning to convert farmland

3:08 pm on 24 February 2022

The government is winding back rules which have made it easier for foreign investors to purchase farmland in New Zealand for forestry conversions.

Forestry section in Port Underwood, South Island, New Zealand

The government is ending the the streamlined forestry test for overseas investors planning to convert farms to forest. Photo: 123RF

The special forestry test is used when an investor is looking to invest in production forestry for harvesting.

It was introduced in late 2018 in a bid to support the government's forestry priorities, including more tree planting.

Farming groups have repeatedly called on the government to urgently review foreign investment in forestry, warning too much productive farmland was being lost.

Figures provided by the Overseas Investment Office show between 2019 and 2021 36,000 hectares of farmland was been approved for sale to overseas investors.

Associate Minister of Finance David Parker announced today the streamlined forestry test would end for overseas investors planning to convert farms to forest.

It would help ensure the right forest was planted in the right place for the right reasons, Parker said.

"The changes to the Overseas Investment Act 2005, approved by Cabinet, mean that proposals by overseas investors to acquire land for conversion to production forestry will be considered under the Benefit to New Zealand test, rather than under the streamlined 'special forestry test'," he said in a statement.

The changes would apply only to forestry conversions, such as where overseas investors looked to acquire existing farmland for planting into a new forest. There was no change to investments in pre-existing forests.

"High quality foreign investment in forestry, and a strong forestry sector, remain important - and we continue to welcome this investment. However, as economic and regulatory contexts change, it is important to consider the impact of particular kinds of investment in forestry to ensure that all stakeholders continue to benefit."

The bill is expected to be introduced to Parliament in a few months. At the same time, some minor and technical improvements would be proposed to the act to help with the operation and effectiveness of 2018 forestry-related changes.