Overseas Ownership Of Land
Far Greater Than The 1% The PM Claims
- Bill Rosenberg
Prime Minister John Key has claimed that less than 1% of New Zealand farmland is foreign-owned, and that the overseas investment regulations, changed in 2010, are working well, so there is little need for concern. In fact a conservative estimate is that the figure is 9% including forestry – and it is artificial to draw a distinction between farm and forestry land. Though he spoke about “foreign-owned” land, in fact the Prime Minister’s figures were based on Overseas Investment Office (OIO) statistics that included leased and other interests in land such as forestry rights. Even if only freehold land is included, a conservative estimate is that over 3% of farmland is overseas owned.
Further, in 2011, the first full year following the change in regulations by this Government, Overseas Investment Office (OIO) statistics show that more freehold land of all types was sold overseas in net terms than any other year since 2001, with the exception of 2006, when Carter Holt Harvey sold its huge forestry estate of 176,902 hectares freehold and 63,615 hectares leasehold. My estimate of net freehold farmland other than forestry sold overseas in 2011 is 18,800 hectares, again one of the largest of the decade, and in addition a net 23,700 hectares of leasehold agricultural land was sold overseas.
The basis for the Prime Minister’s statement that farmland sales in 2011 were low appears to be information from the OIO which uses a method of analysing sales that significantly underestimates the sales of farmland. For example in 2011, its data for net sales of land (freehold and leased) for agriculture show just a net 15,242 hectares sold. This was in a year where one sale alone – the 22,211 hectares of Crown Pastoral Lease sold at Coronet Peak station to Shania Twain’s former husband Mutt Lange – exceeded the OIO’s statistic. I calculate a net total of 42,500 hectares of agricultural farmland (freehold and leased, not including forestry) were sold overseas that year.
In all, 173,600 hectares of freehold and other interests in land under farming changed hands in 2011 to overseas owners – 1.2% of land under farming. That is more than what the Prime Minister claims is the overall total. Even just net freehold sales totalled 69,500 additional farming land including forestry which is about 0.5% of all farmland from just one year’s sales. Remarkably, the freehold sales for 2011 were approximately 6.5% of all non-forestry freehold rural land sales by area that year in New Zealand(1), suggesting that even if only 1% of such land is overseas owned, either the proportion is increasing rapidly or there is a very high churn in overseas ownership, not boding well for long term investment in agriculture.
Latest figures on forest ownership alone – at April 2010, published by the New Zealand Forest Owners Association(2) – show that at least 317,000 hectares are overseas owned, and that overseas owners also control a further 654,000 hectares of leased land. It is “at least” that because the Forest Owners Association identifies the top 16 forest owners, allowing us to tell whether they are overseas companies, but there are another 662,000 hectares under smaller owners which can’t be categorised. According to Statistics New Zealand, total “land under farming”(3), which includes plantation forests, amounts to 14,580,000 hectares. So foreign owned freehold forestry land is 2.2% of land under farming; add on the leasehold land and 6.7% is overseas controlled. That’s 972,000 hectares of forestry land.
Years 2005 To 2011
We don’t know how much land currently used for farming other than forestry (we’ll call it agricultural land for brevity) is overseas owned. No-one keeps statistics on it, and it is high time they did. Even the statistics that exist, which come from the OIO and its predecessor the Overseas Investment Commission (OIC), are a muddle (see the technical note at the end of this article). We have a variety of statistics on overseas acquisition of land for farming from the OIO’s predecessor, the Overseas Investment Commission, covering 1991-2004, plus statistics recently released to me by the OIO which conflict with both the OIC statistics and their own previously published ones.
I carried out my own analysis of all years from 2005-2011. Carefully adding up Decisions by the OIO for 2011 shows that an additional 18,800 hectares of freehold agricultural land was sold into overseas hands, and another 15,200 hectares just swapped hands between overseas owners. So we know at least 34,000 hectares of freehold agricultural land is in overseas ownership from just one year’s transactions. On the same basis, another 61,900 hectares of leasehold farm land is overseas controlled. During the same period, an additional 50,700 hectares of freehold forestry land became overseas owned and just 92 hectares of forestry leasehold land became overseas controlled. A further 26,900 hectares of freehold forestry land swapped hands between overseas owners. All up, that is 173,600 hectares of freehold or other interests in land that were sold to overseas buyers.
The average figures from 2005 to 2011 were not as high. For agricultural land, an additional 10,300 hectares of freehold were sold off a year and an additional 9,200 hectares swapped hands between overseas owners. In forestry, an additional 38,800 hectares of freehold land were sold to overseas buyers a year, though this was greatly boosted by the sale of Carter Holt Harvey’s forests in 2006, and another 81,300 hectares changed between overseas hands per year. In addition to the freehold land, an additional 10,600 hectares of agricultural land leases were sold overseas on average each year, and 9,200 hectares of forestry leases and other interests in land. Another 16,700 hectares of leases were sold from one overseas owner to another per year. Other land sales are smaller but not negligible. There are significant amounts of land in electricity generation, mining and landfills for example. Very valuable land in sensitive areas in cities (such as on the waterfront) is also counted, but tends to be very small areas. Between 2005 and 2011 and average of 4,600 hectares of freehold and leased land were sold each year including from one overseas owner to another, and 1,100 hectares in net terms. Almost all of this was freehold land.
Are These Typical Years?
Data from 1991 to 1998 from the OIC for all sales (including sales from one overseas owner to another) showed an average of 14,600 hectares sold a year for agricultural land, 34,200 hectares of forestry land and 7,000 of other land. Net freehold sales only from 1998 to 2004 showed an average of 39,200 additional freehold hectares sold per year, headed by 16,300 hectares for forestry and 15,800 for agriculture. The remaining 7,100 included 2,800 hectares for electricity, gas and water supply, and 2,200 for mining. There are many problems with the OIO and OIC data but they provide a rough estimate.
Data recently released to me by the OIO is not available split into freehold and other interests in land, and so is not comparable with the older figures I have quoted, and has its own problems. It is not consistent with statistics the OIO publishes with its monthly releases of Decision summaries for years before 2008, and for some years it is wildly different. For example in 2006 it says 527,712 hectares (net) were sold whereas its previous statistics, which are consistent with its Decision summaries, showed “only” 270,508 hectares sold. The overall picture is therefore of higher sales in the 1990s, a drop-off in the mid-2000s and a rise again since then. Inconsistent data makes it very difficult to draw hard conclusions, but the indications are that recent figures are not far from typical.
To estimate how much land is owned overseas we also need to take into account that some of the buyers, especially of agricultural land, become residents, and that some of the land will eventually be sold back to New Zealanders. From the information given by the OIO in its Decision summaries, the number of buyers saying they intend to become residents is relatively small. For the years I analysed, on average 1,400 hectares for freehold land (and only 20 for leased land) came into that category per year. While that was 12% of the net freehold agricultural land sales and 7% of the gross, it was less than 1% of all overseas sales of freehold land for farming including forestry. This assumes that all those telling the OIO they intend to take up residency actually do so. We are entitled to have a degree of scepticism over what this means when it was revealed that film maker James Cameron will have to spend just 88 days every two years in New Zealand to fulfil his residency requirements, and none at all in the first year(4).
On selling the land back to New Zealanders, we can take a look at forestry. Some has indeed been sold back but if we compare 2010 with 2005, the hectares which are either overseas owned or leased by major forestry companies have increased from 808,000 to 942,000 despite a fall in forestry land area. Or we can look at the OIO statistics which give us some indication of how much reselling from one overseas buyer to another is going on. The difference between their “net” and “gross” figures gives a rough estimate. It has averaged 87,700 hectares of all freehold land a year from 2000-2011, and 123,000 hectares of all interests in land, and has followed a very bumpy but rising trend. That suggests that there is a sizeable and increasing estate of land in overseas hands.
How Much Of NZ’s Non-Forestry Farmland Is Owned Overseas?
The way the Prime Minister’s advisers arrived at his figure was released to CAFCA under the Official Information Act. It was done by the OIO itself who told him approximately 245,000 hectares of farmland had been approved for sale to overseas buyers during the last ten years. This figure is consistent with their statistics including both freehold and other interests in land. “Overall;”, they write, “this means that about 2% of farmland has been sold to overseas buyers over that time, but we don't know how much of this land has subsequently been sold back to New Zealanders (the 2% is therefore an upper bound on overseas investment ownership). Going back any further in time brings more uncertainty as the land is more likely to have changed hands and therefore could either have been sold back to New Zealanders or been sold again to another overseas buyer and thereby counted twice” (Maurice Williamson, Minister of Land Information, 27/3/12, letter to CAFCA).
Given our doubt about their statistics, and their complete discounting of any land holdings prior to 2002, their estimate shows little more than it is very difficult to do without the data we need. We know from the 2011 sales that there are at least 95,900 hectares of agricultural freehold and leased land in overseas ownership, which is 0.7% of all land under farming. That makes an estimate below 1% difficult to believe. Even doubling that to 1.5% would be very conservative. Let’s be conservative and say that 2% of land under farming is overseas owned for agriculture and that half of that is freehold and half leased, roughly matching the proportions of sales in those categories. That would put about 145,000 hectares of freehold and 145,000 hectares of leased land for agriculture in overseas ownership.
Adding the 145,000 to the 317,000 hectares freehold in forestry we know were overseas owned, in 2010, that makes 462,000 hectares of freehold land for farming overseas owned – 3.2% of all land for farming. On top of that there is leasehold and other interests in farm land giving a total of 799,000 hectares overseas controlled including 654,000 hectares in forestry. Adding these up we have a total of 1,261,000 hectares overseas owned or controlled, or 8.7% of all land for farming. Given that our approximations are largely on the down side, it is possible that we have reached a level of 10% of our land for farming being overseas controlled including 4% overseas owned.
Should We Be As Worried About Forestry Land As Farm Land?
Yes. First, land use can and does swap between farming and forestry use. Some of the 2011 sales for example were farm land being bought for forestry. Many farms have multiple uses, and some forest owners have indicated plans to revert some forest back to farming when the trees are harvested. It is artificial and often impossible to distinguish between the two. Second, there are issues of public access over forestry land just as there are for farm land. And third, forestry is a very important part of our economy, and an industry in which we have unique advantages such as fast growth rates of exotic trees.
Finally there is other sensitive land that falls into overseas ownership which is not counted in our calculations above. Some is just small blocks such as where a manufacturer has its operations, or the site of a shopping mall or office building. These may be significant economically, but others can be very significant for other reasons. Mining, quarries, hydro and geothermal power schemes (such as those owned by the shortly to be privatised electricity companies), and tourist operations such as ski fields are examples which take control of often large and sensitive areas of New Zealand land. By 2009 Contact Energy, which is 85% overseas owned, had accumulated 10,822 hectares of land according to the OIO. This includes the Clyde and Roxburgh power stations which are in areas highly valued for their environmental, scenic and recreational values, not to mention water. It is still accumulating.
What about the distinction between freehold and other interests in land such as leases and forestry rights? Some countries, especially in Asia, do not allow non-citizens to own land but do allow them to lease it. With appropriate law and lease conditions, that can ease concerns about overseas control of land. It is worth considering in New Zealand. But currently it is not clear that leases would resolve people’s concerns. There may still be access problems, it would not prevent control of production from grass to plate, and the only authority likely to review the appropriateness of renewing a lease is the OIO, and its record is not reassuring. However, it is worth distinguishing between ownership and control of land and considering better policies.
The OIO uses the terms “gross” and “net” sales. “Gross” is just a total of the hectares (and dollars) it has made Decisions to approve sales for. This has some problems. For example it sometimes makes several Decisions about the same piece of land. Those hectares get counted several times. In 2011 there were two Decisions involving the same 25,758 hectare lease for example. “Net” does two things. It takes out sales from one overseas investor to another, which makes sense, but it also discounts partial New Zealand ownership which makes less sense. For example, if a piece of land is sold by a New Zealander to a company which is half overseas owned and half New Zealand owned, only half of the land area will be counted in the “net” figure. This makes sense only with respect to the flows of profits from the investment: a half overseas owned investment will send only half the investment’s profits overseas. But with land, we are much more interested in the control of the land: how it is used, public access and so on. Control of the land can be obtained with a quite small ownership. The official level for the OIO is 25% overseas ownership. Statistics New Zealand along with the International Monetary Fund and many other international organisations put it at 10%. So the net figure doesn’t give an accurate picture of control of the land.
In assigning land to different uses (such as agriculture, forestry, electricity generation and so on), the OIO currently defines the use as what the buyer intends to use it for. Thus if a sheep farm is sold and the buyer says it will be eventually planted in trees, the OIO classifies it as “forestry”. Further, if the land is intended to have multiple uses such as grazing, forestry, lodge, golf course and vineyard, the OIO divides up the land into those categories on advice from the investor. The immediate result is the statistics do not indicate how much land of a particular kind has been sold. In the longer term we will never know whether the stated intentions of the investor were ever carried out.
In my calculations I have used these definitions: “Gross” is the total of the hectares approved for sale, excluding any duplications or sales I knew did not proceed. Duplications were identified only within one year, not over several years. “Net” is the total sales from a New Zealand resident or New Zealand owned company (that is, with less than 25% overseas ownership) to an overseas resident or overseas company as identified by the OIO. Sales from one overseas investor to another are not counted, and neither are Decisions which simply approve an increase in the overseas shareholding of a company, unless the increase takes it over the 25% threshold. Duplications and sales that did not proceed are also excluded.
Land is assigned to three categories of use: non-forestry farm land (“agriculture”), forestry, and “other” according to the existing use of the land as well as I could determine it from Decision summaries and maps. So for example, a sheep and beef farm is classified as “agriculture” even if the new owner intends to convert it to forestry. A farm bought by an electricity company for a hydro scheme is classified as agriculture, but land bought by one electricity company from another for the purpose of electricity generation is classified as “other”.
1. The data for all rural land sales in 2011 was provided by PropertyIQ and was for freehold only, excluded forestry and lifestyle land, and also only records changes in property titles so excludes land sales by sale and purchase of a company that owns land. The comparison is on that basis. The total for New Zealand was 288,000 hectares and for overseas sales 18,600 hectares.
2. New Zealand Forest Industry Facts & Figures 2010-11, NZ Forest Owners Association, http://www.nzfoa.org.nz/publications/facts-and-figures
4. Dominion Post, 3/3/12, “Cameron has to live here just 44 days a year”, Seamus Boyer.