The restrictions on foreigners buying large tracts of New Zealand farmland will soon apply to virtually all New Zealand farmland under a new ministerial directive, which the Government says replaces one that was too lenient.

Associate Finance Minister David Parker and Land Information Minister Eugenie Sage said the new Ministerial Directive Letter to the Overseas Investment Office would ensure that it was a privilege for overseas buyers to buy rural New Zealand land.

Sage said that the existing directive, put in place by the previous Government, was "very weak" and undermined the criteria in the Overseas Investment Act. It effectively opened the door to rubberstamp overseas purchases of farms up to 10 times the average size, meaning the criteria were only being applied to sheep and beef farms of more than 7146ha, or a dairy farm more than 1987ha.

The new directive will apply from December 15, and will mean the Act's criteria will apply to all rural land larger than 5ha, other than forestry. At the same time, a new Forestry Directive will give greater importance to domestic processing.

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Parker said the new directive also tightened how the office will assess genuine benefits from sales to overseas investors, placing less importance on donations and more on bringing in new technology and generating more jobs and exports.

He said too often overseas people were buying New Zealand farms, and then using New Zealand managers and farming systems without adding value to the economy.

"It doesn't markedly increase the output of the farm. It just changes who owns it. We want to make it clear that it is a privilege to own or control New Zealand's sensitive assets, and this privilege must be earned."

The new directive also cuts the time limit for overseas investors claiming that they will move to New Zealand from five years to 12 months.

Parker said the new directive would ease the types of concerns that had led to the rise of Donald Trump and Brexit.

"The middle class in New Zealand is uncomfortable that their prospect in life are being, to a certain extent, hampered by the influence of 1 per centers from overseas who can outbid them for assets that they would otherwise be the buyers of.

"It sends a message that the New Zealand Government is at the forefront of trying to deal with some of the excesses of globalised capital. it's been reported overseas already with great interest that New Zealand is trying to maintain an outward-looking approach to trade ... a liberal democracy at home, and that we want to avoid the backlash that has occurred with the election of President Trump, Brexit, and some of the rise of fringe parties in Europe."

The OIO is yet to make a recommendation on the sale of Landcorp's 1359ha Jericho Station in Southland, for which a Chinese bidder has offered $8.7 million - about $200,000 more than local farmer Ed Pinckney.

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Parker did not want to comment on the case, but said the price difference was not significant. Though foreign buyers pushed up the overall price of farms, he did not expect the new directive to substantially lower prices.

"The only reason that a New Zealand seller sells to a foreign buyer rather than a New Zealand buyer is that they're willing to pay more. It's axiomatic that they have some effect on price. How large that is, no one really knows, but it is absolutely clear that every time an overseas buyer buys a farm, we are at one level frustrating the ambitions of a New Zealander who would otherwise buy that property."

Parker said the new directive was an interim solution that will slow down the sale of New Zealand farms to overseas buyers until the Overseas Amendment Act can be changed.

"Over the next year we're going to be changing the Act and the regulations under it, which will narrow the gate through which applicants can pass, but once they are through the gate, the processes will be faster."

All applications being assessed by the OIO on and after December 15 will be subject to the directive.

Applications not determined by December 15 will be invited to make additional submissions.

Forestry Minister Shane Jones said the Forestry Directive will encourage domestic wood processing and manufacturing.

It also recognised that conditions on forest land may need to be for longer periods, given the often long-term nature of such investments.

Parker also confirmed that a new bill to ban foreign buyers from buying existing New Zealand homes will be introduced before Christmas. It will include higher penalties under the Act to discourage breaches of the law, such as applicants trying to side-step the OIO process.