The New Zealand government has put some necessary brakes on its policy allowing foreigners to own tracts of farmlands in the country.

In an emailed statement today, Finance Minister Bill English said the Government had decided against changes to the Overseas Investment Act, but has introduced "extra flexibility" regarding issues of large-scale foreign ownership of farmlands.

This came after a review and a pending purchase of overseas investors vast tracks of land in Crafar Farms and South Canterbury Finance-related.

"We decided to take the opportunity to make a number of changes to regulation that would help deal with those concerns," said Mr English

One measure is "a new ministerial directive letter to the Overseas Investment Office" which would provide "extra clarity and certainty for potential investors about the Government's general approach to foreign investment in sensitive assets".

The letter would draw attention to the Government's concerns about "the undue aggregation of farmland by foreign investors" and large-scale vertical integration by foreign investors.

"One of the motivators for Government has been the practical reality that over the next few years we could have found a number of existing large aggregated land holdings coming on the market, not least of which could have been the South Canterbury Finance-related holdings... that's an example alongside the Crafar farms and perhaps others."

However, the new rules take effect in December and will therefore not affect Hong Kong company Natural Dairy's bid for the Crafar farms which was initially intended to be the first step in a $1.5 billion vertically integrated dairy production, processing and distribution business selling into the Chinese market.

Among the several changes to regulations outside the Act were a new "economic interests" factor allowing ministers to consider whether New Zealand's economic interests were adequately safeguarded and promoted.

"This will improve ministerial flexibility to respond to both current and future economic concerns about foreign investment, such as large-scale ownership of farmland," said Mr English.

Also a new "mitigating" factor mechanism would be introduced, enabling ministers to consider whether an overseas investment provided opportunities for New Zealand oversight or involvement.

The changes are expected to take effect from December and will not apply to existing applications.

"Overall, the measures I'm announcing today strike an appropriate balance. They increase ministerial flexibility to consider a wide range of issues when assessing overseas investments in sensitive land, while at the same time they provide extra clarity and certainty for potential investors and the Overseas Investment Office."