Recent changes to New Zealand’s Overseas Investment Act 2005 (OIA), together with a new Ministerial Directive Letter, appear to provide a legitimate pathway for overseas investors to acquire land used entirely, or almost entirely, for permanent forestry in New Zealand – provided the Overseas Investment Office (OIO) is satisfied that the forest in question is in fact permanent.
Given the significant difficulties overseas investors have historically faced in acquiring such land, this pragmatic approach marks a departure from past practice.
Forestry under the previous OIA regime
The OIA distinguishes between two primary categories of existing forestry: production forestry and other existing forestry (including permanent forestry).
Production forestry, where trees will be harvested and replanted, previously benefited from a dedicated “special forestry test”, which was generally viewed as a streamlined and straightforward consent pathway for overseas investors.
By contrast, other existing forestry transactions, including investments in permanent forestry (i.e., non‑harvested, enduring carbon‑sink forests), were generally assessed under the more stringent “benefits to New Zealand” pathway, requiring an overseas investor to prove that the proposed acquisition delivered benefits to New Zealand, over and above the status quo. Given the nature of permanent forestry investments (i.e., effectively passive investment, with little opportunity to invest further in the forest to create benefits to New Zealand), it was traditionally difficult for overseas investors to meet the benefit to New Zealand test. This resulted in some applications for consent being declined.
The new OIA regime for existing forests
From 6 March 2026, an application for consent for overseas investment in both production and other existing forests is now considered under the new “national interest” framework. Under this approach, consent applications are screened for potential national interest risks. Where the OIO considers there are reasonable grounds to believe a transaction may be contrary to New Zealand’s national interest, the application is referred to the Minister of Finance for determination. Provided the proposed investment will not present a national interest risk, consent will be granted by the OIO. However, the new Ministerial Directive Letter requires the OIO to impose certain forestry related conditions where the consent relates to production forestry (see below).
These changes have resulted in a notable shift for other existing forestry applications, including permanent forestry, under the OIA. Importantly, the new “national interest” framework focuses on whether an investment is contrary to New Zealand’s national interest, rather than requiring investors to demonstrate material benefits to New Zealand.
What this means for production forests
The Ministerial Directive Letter largely restates the previous requirements of the old “special forestry test”. While the OIO is expected to confirm quickly that the transaction does not pose any national interest risks, it is still required to impose consent conditions for production forestry that broadly mirror the old “special forestry test” (for example, that the land will continue to be used for production forestry, and that existing log supply commitments will be honoured). That said, production forestry applications which are assessed under the new “national interest” framework will benefit from a shorter assessment timeframe (which could be as quick as five working days where no full national interest assessment is required).
What this means for permanent forests
There does not seem to be any obligation on the OIO to impose any specific consent conditions relating to permanent forestry under the Ministerial Directive Letter. This appears to provide a pathway for the OIO to approve the purchase of land in permanent forestry, provided there are no national interest concerns with the investor or neighbouring properties. At this stage, it is unclear what other conditions the OIO might impose for permanent forestry applications.
What the OIO will expect to see for permanent forestry applications
We expect the key focus for permanent forestry applications will be on providing evidence to the OIO that the land is in fact permanent forestry.
In practice, investors should expect to demonstrate that the land is not, and will not be used in future, for production forestry. This will ideally be achieved by way of registration of the forest as permanent forest under the New Zealand Emissions Trading Scheme (ETS). In some cases, that may not be possible or practicable, for example if the forest became “permanent” before the “permanent forestry” category was introduced into the ETS in 2023, and has not been transitioned to ETS permanent forestry. In such instances, the application will need to be supported by information about the property’s history, the length of time it has been permanent forestry, and evidence that no harvesting has occurred or will occur.
Practical limits of the pathway for forestry
In practice, the new “national interest” framework will apply only to forestry investments where the land is entirely, or almost entirely, forestry. If any part of the land being acquired is “farm land” then this new framework would not apply and the applicant will, instead, be required to meet the farm land benefit test.
Farm land under the new OIA regime
The rules relating to farm land, particularly farm land to be converted to forestry, remain unchanged. As a result, mixed-use blocks, such as properties comprising production or permanent forestry alongside pastoral land, will continue to be treated as farm land. This complicates the consent process. Investors seeking to acquire mixed-use blocks, or farm land for conversion to forestry, will still need to apply for consent under the “farm land benefit test”. This test imposes a heightened benefits threshold, requiring the investor to demonstrate that the likely benefits to New Zealand, in relation to certain benefit factors, are substantially greater than under the current state of affairs. In addition, the seller must comply with the open market advertising requirements before the land may be sold to overseas purchasers.
A more pragmatic approach to overseas investment in permanent forestry
Although detailed guidance in relation to the OIA’s new rules regarding permanent forestry has yet to be issued by the OIO, the changes to the OIA appear to represent a significantly more pragmatic approach for some permanent forestry transactions.
As New Zealand’s leading overseas investment lawyers, Bell Gully is well placed to support overseas investors looking to invest in forestry transactions in navigating this change, as well as on wider inbound investment into New Zealand.
If you have any questions about the matters raised in this article, please get in touch with the contacts listed below or your usual Bell Gully adviser.
Disclaimer: This publication is necessarily brief and general in nature. You should seek professional advice before taking any action in relation to the matters dealt with in this publication.
