The only privately-owned island in Northland's Cavalli Islands is for sale for $16 million after a controversial deal to sell it to overseas interests seven years ago sparked an official investigation.

Motukawaiti Island - the southern most in the Cavalli Islands on the east coast, 3km from Matauri Bay - is back on the market after the Overseas Investment Office probed its sale in 2010.

That five-year investigation found some evidence the purchase may have broken the law governing the sale of "sensitive" land to overseas buyers, but not enough to be sure of a successful prosecution.

Now, marketing of the property also known as Step Island comes just as the new coalition Government has announced a clampdown on the sale of New Zealand property to foreigners.


The 37.9ha island is being marketed by Graham Wall Real Estate which says it is on three separate titles. Olly Wall said the agency listed the 37.01ha property about a month ago.

"There are two dwellings on the island. The luxury lodge is on the western side of the island but has been uninhabited for two years," the agency says.

Wall said an Auckland-based lawyer had given instructions to his agency and he could not disclose the identity of the solicitor or the vendor, previously reported to have been Chinese.

A Department of Conservation spokesperson indicated regret that the island was in private hands.

"We are aware that Motukawaiti is up for sale by the Chinese owners and we support the Overseas Investment Office decision on the sale," the spokesperson said this week.

"The island does have potential as a privately owned pest-free island which, if maintained and restored, could be a sanctuary for native species. DOC already manages a number of offshore pest free islands along the Northland coast including the adjacent Motukawanui, the largest island in the Cavalli group and is not pursuing purchase of Motukawaiti," the spokesperson said.

DoC also noted that former Maori Affairs Minister Dover Samuels had called for the island to be returned to the hapu at Matauri Bay, Ngati Kura.

Just last year, Samuels questioned Motukawaiti's sale.

Samuels said Ngati Kura only found out about the sale when the new owners turned up to ask for access across Maori land. Motukawaiti was the only island in the group of more than 20 that was in private hands.

The others were Maori land open to the public or, in the case of Motukawanui, DOC-administered land subject to a Treaty claim and possible future co-governance.

Samuels urged the Government to buy the island and vest it as a reserve until Ngati Kura's Treaty claims were considered.

The OIO began its investigation after learning that New Zealand business St Morris - the entity which bought the island in 2010 - had used funds borrowed from an overseas person to buy the island. That was Chinese businessman Jun Zhang, the OIO said.

"The investigation was to determine whether St Morris was a front for Mr Zhang - to get around the need for consent - or whether Mr Zhang was just a lender. It initially involved examining the purchase, the loan from Mr Zhang to St Morris, and a complex finder's fee transaction - however it also turned up a number of other property transactions," the OIO said in February, 2016.

The island was once marketed as the Cavalli Island Spa Retreat, offering use of a 22m luxury boat and skipper "for cruising and dining". Missionhills marketed the property as a place where you could "enjoy your exclusive private island experience with fishing, diving, kayaking, island exploring or being pampered in the island spa."

February 2010: First enquiry on behalf of Jun Zhang about investing in New Zealand
April 2010: Jun Zhang visits New Zealand
July 2010: Wenning Han (owner of St Morris) signs sale and purchase agreements for Step Island
August 2010: Purchase of Step Island settled
November 2010: OIO begins investigation
March 2013: St Morris/Mr Han defaults on loans to Mr Zhang
August 2013: Island transferred to Mr Zhang in settlement of loan obligations (no consent required as Mr Zhang is no longer an overseas person)
March to October 2014: OIO interviews key individuals, including Mr Han and Mr Zhang
July 2014: Final evidence received
2015: Decision made not to take action
February 2016: Decision released
[Source : Overseas Investment Office]