Foreign Purchases of New Zealand Land Drop Significantly
By LUCY CRAYMER
WELLINGTON–Foreign purchases of land in New Zealand have dropped off significantly over the last seven months, after Chinese investors became embroiled in a long-running land dispute and declining carbon-credit prices made forestry assets less attractive.
Foreigners bought just 62,974 acres of land in the seven months to July 31, down 72% from 223,098 acres in the same period a year earlier, according to data released by the Overseas Investment Office, which has to approve the sale of any land to foreigners deemed to be sensitive. Chinese investors purchased more than 19,502 hectares of land in the seven-month period.
A court action by indigenous tribes and New Zealand business people has delayed the sale of 16 dairy and dry stock farms--known locally as the Crafar farms--to Shanghai Pengxin Group for more than 200 million New Zealand dollars (US$160 million). The suit argues the sale, agreed last year, shouldn't have been approved as the economic benefits weren't sufficient, but the New Zealand Court of Appeal ruled in favor of Shanghai Pengxin in August, and no further appeal has been lodged so far.
New Zealanders have become increasingly concerned about land sales in the island nation as higher agricultural prices and a tightening of credit have made it more difficult for local farmers to buy land. Over the past five years overseas interest in New Zealand land has grown, as foreigners shored up their supply chains.
"Some of our existing (overseas) clients who are still looking...say that they don't like it that every time they turn up there is something about Crafar (in the media) and something about hating overseas buyers," said LJ Hooker rural real estate agent Warwick Searle.
"I suspect it may put a few buyers off who are new to investing in New Zealand," said Mr. Searle, noting there has been a drop-off in investment over the last few months.
Recent investment in New Zealand has been mainly in forestry, to exploit the previously high carbon credit price. Mr. Searle said this was no longer as attractive for foreign investors due to current weakness in carbon prices and uncertainty about the future of carbon trading. European carbon credits are currently trading around EUR3.00 (US$3.77), down from a one-year high of EUR9.05.
The New Zealand government has been pushing for Chinese investment in New Zealand. Finance Minister Bill English said last month the country needed to access capital from offshore markets, including investment from China.
Jason Young, a lecturer at Victoria University in Wellington who specializes in Chinese investment in New Zealand, said while he couldn't say for sure it seemed that many Chinese investors were waiting for the outcome of the court case before going ahead with their own plans.
"In the short and longer term we are likely to see investment increase," said Mr. Young. "For Chinese investors the important thing is that the New Zealand government was clear throughout (the Shanghai Pengxin purchase) that they would treat all investors from all over the world exactly the same."
Write to Lucy Craymer at [email protected]