April 29, 2008

Vector Energy sold to Chinese spy?

ANY STORM IN A PORT

China's Trojan horse in NZ

[The following story initially ran in the April 06 edition of Investigate magazine, but is directly relevant to the purchase announced April 28, 2008 of Vector Energy's Wellington grid by the same businessman]

The Hong Kong business conglomerate trying to purchase a stake in some of New Zealand's biggest port companies [and now the purchaser of energy company Vector] has been named as a front for the People's Liberation Army of China, and some of its associates have been caught shipping weapons and alleged WMD technology. IAN WISHART has more

 

His name is Li Ka-shing, and if his name sounds like a cash register there's a very good reason: this 77 year old Chinese businessman has just been ranked by Forbes magazine as the tenth wealthiest person in the world, with a fortune estimated at nearly US$20 billion. His companies, including Hutchison Whampoa, account for 10% of the value of the Hong Kong stock exchange and have tentacles that reach across the globe – more than forty countries according to one estimate – and in industries as varied as mobile telephone networks, electricity grids, retailing, shipping and real estate.

Many New Zealanders may have become familiar with Li's work in the sixties and seventies, when his main business was making plastic toys with the infamous "Made in Hong Kong" imprimatur.

But there are two sides to the Li Ka-shing story. One is the traditional fodder of business magazines, lauding the rags to riches story of a billionaire whose father died after the Japanese invasion of China before World War 2, leaving a 12 year old boy with the task of earning enough money to feed his mother and siblings. It's a story of a man making wily business decisions, building an empire and showing aspiring MBA graduates how it's done.

And here's how one of those gushing business stories reads:

"The move by the richest man in Asia and one of the richest in the world to take a stake in the operation of the Port of Lyttelton is one that has potentially great benefits for Christchurch and Canterbury and ultimately the rest of the country," said the Christchurch Press in an editorial mid February.

"There is no need to be starry-eyed about the proposed venture. Li Ka-shing has risen from complete destitution as a refugee who fled the raping and pillaging of China by the Japanese in the 1930s to become a multi-billionaire.

"He did it by being an astute and hard-nosed businessman. He also did it, according to one account in a business journal, by 'remaining true to his internal moral compass' and operating with integrity."

Like we said, that's one side of the Li Ka-shing story.

The other side of Li Ka-shing is much darker, and less likely to be taught in graduate classes. It's the story of a man whose companies are regarded by Western intelligence agencies as nothing more than a money-making front for Chinese military intelligence as China prepares for what it sees as an "inevitable" conflict with the US.

As this 1996 diplomatic cable release by the US Government under a Freedom of Information request shows, Li Ka-shing's businesses didn't make money the hard way.

""Embassy Panama has received information to the effect that HIT (Hutchison International Terminals) is controlled by mainland Chinese, perhaps through a Macao front which allegedly recently invested $400 million in HIT," states the cable. "Such control would have security implications and might affect the Panamanian government's views on awarding the port concessions."

The "mainland Chinese" referred to in 1996 have turned out to be the Chinese Government itself, and more specifically its People's Liberation Army – more of which in a moment, but first some background.

Intelligence agencies have used what they call "arms length" front companies – genuine commercial operations whose owners are sympathetic to a particular cause. Back in the 1970s and 80s, for example, America's CIA set up a global freight airline, Air America, and a merchant banking operation, Nugan Hand Bank of Australia, to help launder money and assist with so-called "black operations" that the US government could not directly be involved in. Discretion, and plausible deniability, required "cut-outs" who could take the heat if discovered. One CIA front company, US accounting firm Bishop Baldwin Rewald Dillingham & Wong, even went so far as to open an office in Auckland in 1983.

But there's one difference between CIA front companies and Chinese ones. Ultimately, the US government takes a major PR-hit when dirty covert operations are uncovered. The Chinese government suffers no embarrassment when caught spying, because of its tight control of Chinese citizens and the lack of democratic accountability.

Investigate enjoyed a world exclusive in March 2000 when it reported that Chinese businessman James Riady, wanted for spying and illegal payments to the US president, Bill Clinton, had been in New Zealand as a guest of the National Government and introduced to Clinton at APEC.

Ever since Clinton was elected to the Whitehouse in 1992, China has bought influence in American politics by using businessmen like Riady and Li to donate to Presidential campaign funds, or the election campaigns of key senators and congress representatives. As a result, when America's lease fell due on the Panama canal in 1999, the Clinton administration let it slide, and Li Ka-shing's Hutchison Whampoa picked up control of the crucial ports at either end of the Panama canal. According to US reports, Hutchison also paid substantial bribes to Panamanian officials to secure the deal.

Amazingly, the deal also allows Hutchison to transfer its control of the Panama facilities to any other organization or country of its choosing, meaning it could – in the lead up to a conflict – effectively place the canal directly and officially in the control of China, allowing Chinese military and naval forces to legally occupy and defend their beachhead in the Americas. Because of the immense strategic importance of the Panama canal, any military attack on it could cause damage making the canal impassable regardless of who controls it, thus limiting US options.

Newssite WorldNetDaily reported a 1995 diplomatic cable from the US Embassy in the Bahamas revealing Hutchison had just been given the go ahead to build a US$88 million container port there. The embassy copied its cable to the Drug Enforcement Agency and US Customs, noting the possibility of a major increase in smuggling through the Hutchison facility.

They were right to be concerned. There are growing reports of a strong Chinese organized crime presence in Panama.

Some analysts fear the US is becoming more vulnerable to "Trojan horses", in the form of cargo or container ships that dock containing weapons of mass destruction and/or short to medium range ballistic missiles, leaving America vulnerable to a surprise attack with no possibility of missile intercept because of the short ranges involved. Indeed, this has been one of the security fears over the past month because of a bid by a Dubai-based company to take control of major US ports – the possibility that weapons of mass destruction could be smuggled in through civilian ports controlled by foreign interests.

Al Qa'ida has already been implicated in smuggling Islamic extremists into the US across the Mexican border, but China is equally active in shipping the ingredients of terror through commercial operators. Li Ka-shing, for example, sits on the board of CITIC, the China International Trust Investment Company, which has also been active in New Zealand business circles and still has a presence here. But US investigations have determined CITIC is also a People's Liberation Army front company, and during the Operation Sidewinder investigations in Canada recently authorities discovered quantities of weapons had been supplied by a CITIC company and stored on Mohawk Indian reservations.

CITIC was also in the news at Christmas after signing a US$900 million contract to build an aluminium smelter in Iran. Aluminium tubing is used in the production of missile technology and nuclear weapons.

China's state owned national shipping company COSCO, again a 50% joint venture partner in some of Li Ka-shing's operations, has been implicated in the sort of activities that would make the CIA blush.

"Both U.S. Senate and Canadian intelligence sources have described COSCO as "the merchant marine for China's military"," reported Canada Free Press last year.

"According to U.S. intelligence reports, COSCO vessels do not just transport Oriental bric-a-brac. COSCO vessels have been caught carrying [two thousand AK-47] assault rifles into California and biological-chemical weapons components into North Korea, Pakistan, Iraq and Iran. Add to these disturbing events that Canadian law enforcement agencies have kicked in with hard-line information that Chinese Triad criminal elements are active in and around Canadian ports."

But it isn't just smuggling items in, there is also the question of Chinese spies operating through front companies to smuggle information and technology out of countries like Canada, the US, Australia and New Zealand – all of which have been named internationally as prime targets for Chinese intelligence.

According to the Canada Free Press report:

"Conspiracy theories were tossed out the window when U.S. Congressman Dana Rohrabacher revealed that the U.S. Bureau of Export Affairs, the U.S. Embassy in Beijing and the Rand Corporation had identified Li Ka-Shing and Hutchison Whampoa (Li's primary business) as financing or serving as a conduit for Communist China's military in order for them to acquire sensitive technologies and other equipment."

But again, Chinese intelligence is one step ahead of the West. Just as Bill Clinton had been paid off in the US in order for China to gain access at the highest levels, so too was the-then Canadian Prime Minister Jean Chretien:

"Former Prime Minister Jean Chretien's connections to the burgeoning CITIC conglomerate served as his entrée into the private sector," says Canada Free Press. "While John Turner was leader of the federal Liberals, Chretien was working for Gordon Securities, one of the many Li-controlled companies on Canadian soil."

According to Canada Free Press, Operation Sidewinder was "sideswiped" after political pressure from Chretien.

With the Chinese military currently embarking on the most rapid rearmament in world history, the involvement of Chinese commercial entities should come as no surprise.

An American Defense Council report published two years ago paints an extremely disturbing picture for the West.

"Li Ka-Shing, the leader of Hutchison Port Holdings (China's primary shipping line), has close ties to the Chinese Communist Party and to the CITIC. The CITIC is believed to serve as a funding umbrella for the Chinese military, supporting the acquisition of military-related technologies. Hutchison Port Holdings manages, operates and is in possession of significant portions of three of the world's top five ports as measured by both the number of containers shipped and total tonnage shipped.

"China's other two huge shipping lines are directly controlled by the Communist Party. One, the China Ocean Shipping Co (COSCO) was described in the Cox Report issued by the US Congress as follows: 'Although presented as a commercial entity, COSCO is actually an arm of the Chinese military establishment'."

According to the Defense Council report, there are 10 strategic global shipping "choke points" that are crucial to US oil and trade lifelines.

"In the last decade, China has succeeded in building, managing or operating strategic ports adjacent to, or, as in the case of the Panama canal, at the entrance and exit of seven of these 10 global shipping choke points."

What has not been widely reported is another paragraph in the Congressional investigation into Chinese spying:

"The Clinton administration has determined that additional information concerning COSCO that appears in the Select Committee's classified final report cannot be made public," concluded the watered down version released by the House Task Force on Terrorism and Unconventional Warfare.

COSCO already has a strong presence in New Zealand, with offices in Auckland and Christchurch and a container line service that runs into Auckland, Tauranga, Napier, Wellington, Nelson, Lyttelton and Port Chalmers. Four of its vessels here, including the Aotea, are Panamanian registered.

While there is no doubt that COSCO routinely ships ordinary freight, every day, as any other commercial business does, there are also days when it ships the extraordinary, as this American news report notes.

"At least three arms shipments were traced from China to the Cuban port of Mariel during the past several months, according to an article Tuesday in the Washington Times. All the arms were aboard vessels belonging to the state-owned China Ocean Shipping Co., or Cosco, U.S. intelligence officials told the newspaper. The explosives were said to be "military-grade" material, the newspaper said.

"U.S. officials said Tuesday that the subject of arms trafficking between China and Cuba is a worrisome one, though they stopped short of confirming the Washington Times account. "We are very much concerned with this PLA [People's Liberation Army] cooperation and movement of military equipment in Cuba," said James Kelly, assistant secretary of state for East Asian affairs, when questioned during a hearing of the House International Relations subcommittee."

Questioning of Li Ka-shing is something Canadian government security advisor Scott Newark would like to do. He told the respected online journal NewsMax.com that a request by Li's Hutchison group to purchase ports in the US be given full congressional scrutiny.

"I'd like to suggest that the appropriate congressional committee hold hearings and that they call Li Ka-shing as the first witness. I volunteer to be second, but frankly there are people far more knowledgeable than me in this regard, including for example the International Association of Airport and Seaport Police, which just held their conference in NYC. As a speaker at that conference I urged ridding ports of such crime and rogue government-connected companies, not making them the local constabulary."

According to NewsMax, Newark identified five critical port security issues: "preventing smuggling of drugs, guns and people; preventing export of stolen products; providing site security as a result of 9/11; preventing terrorism related smuggling; and preventing attacks on ships leaving ports."

To that end, Newark sounds a warning that is relevant for New Zealand authorities as they consider whether to approve a buy-in by Hutchison into Lyttelton and possibly the Auckland or Tauranga ports.

"We need full scrutiny of the principals of Hutchison Whampoa and all of their business or government-related associations, and any history of any activity of them or their associates – including links to organized crime and terrorist groups, activities or states supporting the same – that would raise concerns to any of the above.

"We should give full scrutiny to any relationship of Hutchison Whampoa, its partners, directors or officers with any foreign government that would raise concerns to any or all of the above issues."

If that isn't ringing warning bells at the Christchurch City Council and in the Beehive, it should be, especially as the Li's business partner – the Chinese military's "merchant marine arm" COSCO - is already a big player in New Zealand ports.

Both COSCO and Hutchison have faced this negative publicity overseas. In COSCO's case, it hired one of America's leading public relations companies to spin the strong business and economic benefits of trade with China to the news media and key politicians, while playing down the "unfounded and negative" stories we've just highlighted. According to commentators the PR ploy has worked, with coverage of the company in the US largely restricted to positive business and trade stories in the media.

Nor is Li Ka-shing a stranger to New Zealand business. In Australia, he's the majority owner of Hutchison 3G Mobile, but you might be surprised to learn Theresa Gattung's Telecom New Zealand holds the remaining 19.9% in a joint venture.

Ironically, it was only a decision by US telecommunications regulators to threaten a veto that stopped Li Ka-shing's Hutchison from buying the giant international phone network Global Crossing three years ago. The purchase would have given Hutchison the possible option of eavesdropping on phone and data calls being made on Global Crossing's planet-wide network of undersea phone cables linking all the continents. Global was also bidding for US Defence contracts at the time.

Li's business ventures with the Chinese military include the Guangzhou Aircraft Maintenance Engineering Company, a Chinese air force company 25% owned by Li; and a one-third stake in AsiaSat, also part owned by the People's Liberation Army.

The move by Hutchison Port Holdings Ltd (HPHL) to purchase the Lyttelton Port Company in Christchurch raises some more questions for Helen Clark's Labour Government to answer. HPHL is registered in the British Virgin Islands, the same Caribbean tax haven at the centre of our February story about the New Zealand Labour Party's biggest campaign donor, Owen Glenn. Coincidentally, Glenn is also a shipping handler who's managed to get a rare Class A business licence in China and is said to have influence in Beijing, but whose operations don't appear to stack up based on what Investigate was able to discover. Glenn funneled $500,000 into Labour's election coffers last year.

Is the New Zealand Labour Party receiving money from the Chinese Government through a complex web of shady business figures and front companies? At this point Investigate doesn't have enough information to answer one way or the other, but the magazine's investigations are continuing.

In the meantime, we have discovered Li Ka-shing has reserved the name Hutchison Ports New Zealand Ltd with the Companies Office. The deal relies at this stage on Christchurch City Holdings Ltd acquiring the 31% of Lyttelton port shares that it doesn't already own, and that purchase offer closes on April 8. If CCHL gets the shares it needs, it plans to sell down 49.9% of the port to Hutchison. But Hutchison would get majority control of the company actually running the port on a daily basis, effectively putting the Chinese Government in command of imports and exports out of Christchurch.

The Christchurch Press reports the deal was driven initially by Lyttelton Port Company management, but picked up by Hutchison Port Holdings executive directors Mark Jack and Richard Pearson – both apparently ex-pat kiwis. A search of Companies Office records lists a Mark David Jack, resident in Hong Kong, as sole director of Ardmore Hangars Ltd – set up last year – and Ardmore Aviation Services Ltd, set up in 2003.

We have been unable to confirm any New Zealand directorships for Richard Pearson.

Christchurch mayor Gary Moore has dismissed reported links between Hutchison and the Chinese military as the work of "conspiracy theorists" who'd been listening to a sole US congressman, and Mark Jack has told critics to ignore the bad media and concentrate on the company's economic performance – a carbon copy of the PR stance Hutchison has taken in the US.

But Gary Moore – as provincial local body mayors often are – suffers from not being privy to intelligence. If it was only "conspiracy theory", why was Hutchison forced to back away from Global Crossing? And if Moore is correct about only one congressman raising concerns about Hutchison, why did the South China Morning Post report that Hutchison's paid lobbyists in the US were targeting three, including the then Senate Majority leader Trent Lott and former US Defence Secretary Caspar Weinberger who testified Hutchison's takeover of the Panama canal would pose a security threat to the US?

And if Gary Moore is correct, how does he explain the now-released 1999 intelligence briefing from the US military Southern Command which states: ""Hutchison's containerized shipping facilities in the Panama Canal, as well as the Bahamas, could provide a conduit for illegal shipments of technology or prohibited items from the west to the PRC, or facilitate the movement of arms and other prohibited items into the Americas."?

We put similar questions to a spokesman for Christchurch City Holdings Ltd, the current majority owner of Lyttelton Port Company, and ended up in a slanging match where the response to the allegations was "so what if he is?". The spokesman pointed out that national security issues were something for the Prime Minister to sort out, and Christchurch was only interested in the commercial deal.

The spokesman referred to a statement by a US Clinton administration official in 1999 to the senate hearing that Hutchison Whampoa's operation of the Panama ports would have no impact on shipping movements, and that the company had no known ties to the Chinese government.

However, those claims have already been tackled by the Washington Times' Insight magazine:

"Western policymakers and business leaders have little or no idea of China's grand strategy and how Beijing's leaders want to situate their country for the next century. When, in 1999, Sen. Trent Lott (R-Miss.) sent Insight's report, "China's Beachhead at Panama Canal," to then defense secretary William Cohen, he called for a full national-security appraisal of the problem. Lott told Cohen, "U.S. naval ships will be at the mercy of Chinese-controlled pilots and could even be denied passage. It appears we have given away the farm."

"At Lott's request, the Senate Armed Services Committee held a hearing in which four Clinton-administration witnesses testified that Hutchison Whampoa posed no security challenges to the United States [see "PC Answers on Panama Canal," Nov. 22, 1999]. But not one of the witnesses could answer the fundamental question, posed by Sen. Robert Smith (R-N.H.): "Do you believe the People's Republic of China uses commercial enterprises to advance their military interests?"

"Bill Clinton's assistant secretary of defense, Brian E. Sheridan, who had issued a defense of Hutchison Whampoa, confessed, "I don't know." Alberto Aleman Zubieta, whom Clinton had appointed to run the Panama Canal until 2005, didn't answer either. Neither did Joseph W. Cornelison, the deputy administrator of the Panama Canal Commission, nor Lino Gutierrez [the official referred to by Christchurch City Holdings Ltd's PR man], then principal deputy assistant secretary of state for Western Hemisphere Affairs. All had contradicted their testimony. Only Marine Gen. Charles E. Wilhelm, then chief of the U.S. Southern Command, answered affirmatively to whether Beijing uses commercial enterprises to advance its military interests, saying only: "I think so."

"That was it. And apparently the government has learned little since. "Many of those who are engaged in China policy or who invest there remain blithely ignorant of Chinese goals to replace the United States as the reigning world power," says Thomas Woodrow, a former senior China analyst at the Defense Intelligence Agency."

Lino Gutierrez is the Clinton official whose testimony was used to rubbish suggestions of Chinese government investment. He told the senate hearing:

"Through publicly available information, we have been able to ascertain that neither

Hutchison-Whampoa, nor its subsidiaries Hutchison Port Holdings (HPH) and the Panama Ports Company (PPC), have any significant investment from mainland China."

What isn't clear is how Gutierrez determined that, when many key companies in the group including Hutchison Port Holdings are registered in tax havens so their true ownership cannot be searched.

Investigate did finally get to put a series of questions to CCHL Chief Executive Bob Lineham. The questions, and his answers, are as follows:

  1. How is CCHL satisfied that, even if Hutchison is a front company for the People's Liberation Army of China, that its majority stake in the operating company for the Port of Lyttelton remains a good idea?

Answer from Bob Lineham:

"In the event that Christchurch City Holdings Limited's (CCHL) Takeover Offer for Lyttelton Port Company Ltd (LPC) succeeded, and Hutchison Port Holdings Ltd was introduced into the Port of Lyttelton, the Christchurch City Council would retain control of the Lyttelton Port Company with a 50.1% voting majority (through CCHL) of the shares in LPC.

"The purpose of the new port operating company in which HPH would have a 50.1% share is to operate the Port of Lyttelton. It does not and cannot control the Lyttelton Port Company. With HPH as a port partner, the Port of Lyttelton would be controlled, as it is today, by the people of Christchurch through CCHL and the Christchurch City Council.

  1. How is CCHL satisfied that Li Ka-shing is a legitimate businessman, in the face not only of his vast personal fortune in a socialist country, but also his well-documented ties to communist China and its ruling politburo long before the 1997 handover of Hong Kong? No answer received.
  2. Why is it not strange that a communist state can be home to the world's tenth richest man, without corruption being a factor? No answer received.
  3. In what way has CCHL consulted with the New Zealand government or its officials over the proposed buy in?

Answer from Bob Lineham:

"The introduction of Hutchison Port Holdings to the Port of Lyttelton would be subject to the usual regulatory consents that are required when an overseas company is involved."

  1. Li Ka Shing or companies and individuals associated with him have been implicated in smuggling 2,000 AK 47 fully automatic military rifles into California, and shipping componentry for nuclear weapons to Iran. CITIC, a Chinese Government company that Li helped found and sits on the board of directors of, is building an aluminium smelter in Iran the product of which can be used in missile technology and the production of nuclear weapons. Why are the reputational issues surrounding Li Ka Shing not a concern to CCHL? No answer received.
  2. Why is CCHL not concerned about the fact that Hutchison was prevented from purchasing telecommunications provider Global Crossing in 2003 because of concerns that he was a security threat to the US? No answer received.

And if the Christchurch port administrators are relying on assurances by Clinton administration officials that Li Ka-shing is not a security threat, they could be backing the wrong horse. Sadly, Investigate has reported before on how badly briefed New Zealand officials are on international intrigue. Former National Government Prime Minister Jenny Shipley was given a briefing by Foreign Affairs and Trade on visiting businessman James Riady in 1999 that read like this:

"The Lippo Group is one of Indonesia's largest conglomerates in terms of market capitalisation with estimates of value putting it at having US$11 billion in assets.

"The vision of its founder Mochtar Riady is to transcend the institutional limitations placed upon organisations run in the traditional overseas Chinese pattern and adopt a modern publicly owned and professionally managed pattern of business.

"Mochtar has formed alliances and joint venture partnerships with world class multinational corporations and has high calibre professional management staff working for him.

"The Lippo empire rose out of the success of the Lippo Bank. Unlike just about all other banks in Indonesia its founder Mochtar Riady tended to shun the Suharto connections that for other conglomerates in Indonesia were the keys to success.

"He avoided lending to politically connected groups or to state enterprises and instead built his business on legitimate retail and trade finance."

Yes, well. That's the New Zealand intelligence briefing, but while our diplomats were talking about how politically-neutral and non-crony like the Riadys were, the businessmen themselves were on the run from US justice for illegally laundering $4 million of illegal Chinese government donations to President Clinton's re-election fund.

The saddest part of that story was the information about the Riadys was in the public domain, just as the information on Li Ka-shing is, but New Zealand trade officials chose to ignore it or write it off as "conspiracy theory".

Interestingly, one report from a US Congressional team that visited Panama says "Li Ka-Shing is an investor in the Riady family's Hong Kong China Bank." It is this international game of join the dots that seems too hard for New Zealand officials to understand.

The Riadys were heavily involved with a company called China Resources Ltd, which is also a joint venture partner with Hutchison in the Panama canal. China Resources has long been known as a front for Chinese intelligence, but this too was completely missing from the intelligence briefing given to Shipley. Indeed, judging from their innocuous contents one would have to suspect the briefing was in fact prepared by Chinese intelligence!

"The Lippo Group has a strategic position in China and Hong Kong with substantial investments and relationships with powerful business and government people and organisations.

"It owns 49% of the Hong Kong Chinese Bank with the remaining 51% held by China Resources (Holdings) which is a wholly-owned enterprise of China's Ministry of Foreign Trade and Economic Cooperation."

So despite Christchurch's insistence that New Zealand authorities have it all in hand and that citizens can rest easy in their beds, Investigate is reminded of this news release about the previous Asian-investor golden boy James Riady, issued by the US Department of Justice in 2001:

JAMES RIADY PLEADS GUILTY WILL PAY LARGEST FINE IN CAMPAIGN FINANCE HISTORY FOR VIOLATING FEDERAL ELECTION LAW

WASHINGTON, D.C. - James Tjahaja Riady will pay a record $8.6 million in criminal fines and plead guilty to a felony charge of conspiring to defraud the United States by unlawfully reimbursing campaign donors with foreign corporate funds in violation of federal election law, the Justice Department's Campaign Financing Task Force and the United States Attorney in Los Angeles announced today.

In addition, LippoBank California, a California state-chartered bank affiliated with Lippo Group, will plead guilty to 86 misdemeanor counts charging its agents, Riady and John Huang, with making illegal foreign campaign contributions from 1988 through 1994.

As the world's largest port operator, there are sound economic reasons for Hutchison to operate New Zealand ports. But there appear to be equally sound political and strategic reasons as to why they should not. If the deals proceed, it could turn into yet another political bombshell for the Labour Government to work through, a government that is, itself, close to China.

Posted by Ian Wishart at 12:57 AM | Comments (0)

March 09, 2007

SUMMER BREEZE INVESTIGATE: JAN 03

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Ask anyone about the summers of their childhood and the stories are likely to be similar - long lazy days at sleepy coastal towns. But now those sleepy hollows are becoming mega-resorts, and HAMISH CARNACHAN wonders if paradise is being lost forever

It’s a migration of monumental proportions. Lured by a mysterious, seemingly magnetic, pull of azure oceans and a bizarre ritual of basting in the sun on golden sands, New Zealanders leave the city centres and rural outposts in their droves during an annual summer exodus.

Warm seasonal weather, longer days, restless nights, and pohutukawas bursting into bloom seem to trigger this strange propensity to drift in a coastal direction at the same time year after year. When the signs are right, tools are downed, computers terminated and homes fortified.

The traditional migratory paths become clogged and congested with cars snaking like bison across an African savannah. Irritable bulls driving the family group to their traditional summer stomping grounds jostle for position, cursing and bellowing at each other, often coming to blows with the heat-induced aggression.

Of course many do stay behind, particularly the elderly that are too weak to travel, but also a handful of the younger generation in their late teens or early twenties. These youngsters will remain and invariably search out a mate in their year-round environs.

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However, the masses will still assume their yearly movement, returning to familiar haunts like salmon to a spawning stream. This pattern has been witnessed for many decades now but as the population has exploded the numbers of leavers have swelled exponentially too.

As time and the summer travellers march on, so too does progress, and many of these migratory environs are starting to bear the weight of modification. On an increasing scale it seems that the traditional kiwi holiday is evolving to accommodate the changing lifestyles of New Zealand’s seasonal wanderers.

In many places, multi-storey apartments and ‘holiday homes’ of palatial proportions have usurped the temporary canvas and caravan cities that once dotted the shorelines of our favourite summer retreats.

The traditional fish and chips shop now has to compete with cafés that have popped up to cater to the migrants’ more extravagant culinary expectations, and the staple summer diet of beers and bangers on the barbeque have been exchanged for champers and gourmet paninis.

Mount Maunganui in the Bay of Plenty is a prime example of a traditional holiday hotspot that has undergone such a transforma-tion. Local resident Graham Barnett first started spending time at Mount Maunganui in the early 1950s. Then, in his late teens, he was drawn to the beach, the surf, the sun, and of course, the girls. He says Mount Maunganui beach became a focal point of his life, he was a fit young man, a strong swimmer, and loved the beach lifestyle, so the natural progression was to sign up with the Mount Maunganui Surf Lifesaving Club.

Barnett still classes himself as a strong swimmer, which isn’t all that surprising considering he remains an active member of the surf lifesaving scene. In fact, he’s coming up to 50 years service at the club and, as the longest serving member, he can still be found patrolling the beach a couple of days each week.

Having spent most of his adult life at ‘The Mount’, as the locals like to call it, Barnett has had a first hand account of the development that has taken hold of this once quiet beachside retreat. He says he isn’t surprised by the change but holds fond memories of the place before it became the popular destination it is now.

"It’s always been a nice place to be so I guess progress was always going to catch up with us at some point or another," says Barnett.

"Back in the fifties Christmas was still pretty busy and there were plenty of people around – not by today’s standard though."

Barnett remembers an almost hour long trek from Tauranga to Mount Maunganui beach, an unsealed loop route that skirted the southern end of the harbour. Nowadays, with the recently completed harbour-bridge causeway, the trip takes less than 10 minutes.

"The Mount used to be a little place but obviously as access opened up more and more people started to visit or move in. Before that though, there weren’t many houses and you were classed as living in the sticks if you were any further out than the rugby club [approximately 2km south of the main beach]. Papamoa [approximately 10km south of the main beach] seemed an eternity away and we used to call it Shanty Town because it was just a handful of run-down baches.

"Really, when you look at the change that’s gone on, the Mount has gone from a sleepy little holiday spot to Surfers Paradise."

His reference to the popular destination on Australia’s Gold Coast is an allusion to the numerous apartment blocks that now dominate the beachfront properties at Mount Maunganui.

Luxury condominiums now stand in place of the scattered and simple baches that Barnett recalls, and developers eagerly eye up the few that remain as potentially lucrative investments.

As a recent example, a two-bedroom Lockwood bach and its 811sq m section at Mount Maunganui, which initially sold for $1.8m, is understood to have gone for between $2.1m and $2.2m in the second sale just three weeks later. The site can be developed with seven new apartments or town houses.

Tauranga real estate agent Gill Beadle says dramatic increases in property prices at Mount Maunganui, highlighted in this case, have only eventuated within the last five years. He attributes the rise to population increase.

"We’ve seen tremendous population growth over the last 10 years and subsequently subdivision started to take off in the nineties. Also, we saw Auckland money starting to come south, which was a change because traditionally it went into northern beach locations.

"You can really put it down to supply and demand. With the influx of people the demand for property on the Mount peninsula has soared and therefore so have the prices."

Beadle insists holiday homes still make up a substantial slice of the Mount Maunganui property market but says that that share is competing against development and an aging population looking to retire in the area.

"Development of property into apartments will continue because there’s a demand and this trend has really been driven by the Auckland apartment scene. I don’t think the Mount will ever end up like the Gold Coast because the council has restrictions to ensure there’s not too much height but the change has been noticeable. It’s gone from one windswept café 10 years ago to struggling to get a seat in one of the six down there today."

Mount Maunganui may not be the Gold Coast but at an average of $450,000 for an apartment it is certainly starting to become somewhat of an exclusive destination, generally out of reach of most kiwi holidaymakers.

Beadle says the locals are not happy with the extent of the development but, understandably, they love what it’s doing to their property prices.

Locals aren’t too happy about the influx of visitors each summer either. Each year you can expect reports of mayhem descending on Mount Maunganui as drunken youths take the New Year’s festivities too far.

"It’s crazy at that time of year," says Barnett. "We didn’t have all the fools in fast cars in the early days. That was the best time. We had three dance halls going every night and there was hardly ever any aggro.

"Now the young idiots want to party all night and sleep all day. One of the biggest problems is broken bottles on the beach. It costs a hell of a lot to employ people to keep the place tidy over Christmas and it’s the local ratepayers who have to foot the bill."

Drunken youths are not the only gripe though…

"We’re getting like Coronation Street. We used to have plenty of room around but now with these apartments and houses and all the cars it’s causing big problems."

When Barnett first ventured out to Mount Maunganui beach all those years ago space was never an issue. He recalls never having trouble finding a camping ground. Today, however, an Internet search for campgrounds in the area turns up only one result, Mount Camp Ground, which, by the way, is also now a company-owned and operated investment.

"In the early days you could just park up and camp on the beach or even pitch a tent and party on one of the vacant lots," says Barnett.

It seems the traditional kiwi camping holiday at Mount Maunganui is now as hard to come by as those vacant house sites.

Of course there are still locales to escape from the hustle and bustle of city living. But small holiday centres whose mainstay was once steeped in this now nostalgic notion of getting back to nature and living simply are few and far between today.

Any such places within a few hours drive of a major civic centre seem to have been taken over, consumed by coastal development that has, over recent years, moved as swiftly as the masses pack up and migrate in summer. For example, there is the Coromandel Peninsula. Traditional summer escapes like Tairua, Whangamata and Pauanui have been developed to such an extent that they are now, essentially, satellite townships of Hamilton and Auckland.

The Thames-Coromandel District Council’s (TCDC) area manager for Tairua, Pauanui and Whangamata, Peter Mickleson, says the improved access to the peninsula has boosted the appeal of the area and has had a marked effect on the social fabric of holidaymakers.

"The people who come here now tend to have a very high disposable income, particularly holiday home owners. I think because there are now better roads and access is easier it’s a more attractive prospect to buy those holiday homes," says Mickleson.

The TCDC has a policy in its district plan to limit development of the existing settlements to their present boundaries but Mickleson says subdivision is now commonplace.

"There’s a lot of development happening here. We probably get about 10 to 12 subdivision applications a month just for Whangamata. It’s all basically infill so it’s the quarter acre getting chopped into two or three or four; the old bach being remodelled into a modern home; that type of thing."

The majority of these new homes stand vacant for most of the year but when summer arrives so too do the holidaymakers – en masse. Whangamata swells from a permanent population of about 4500 to almost bursting point at 40,000 people over this period. Mickleson admits that this stretches local amenities and infrastructure to the limit.

"Our water supply systems and our waste disposal systems are designed for 4500 people. It can cope with peaks to an extent but, for instance, if we have a very dry summer then we do run out of water," he says.

Unlike Mount Maunganui, which has the backup facilities and services of Tauranga, a sizeable city, places like Whangamata, Pauanui and Tairua are essentially still isolated.

Mickleson says the population influx over the summer months means these towns have now been forced to a crossroad in their future development options.

"It creates a dilemma within the community in that do you build a water supply system to cater for 40,000 people that gets used for three weeks of the year and is paid for by 4500 permanent residents, or do you build a system that caters to permanent residents and is stretched to capacity during peak times?"

And when the locals are expected to foot the bill for an influx of "outsiders" it can create tension says Mickleson. On the other hand, he acknowledges that the visitors actually support the permanent residents – most of the retailers’ profits are made over the summer season. He says an important part of small-town living is being able to juggle the costs and benefits of the seasonal influx.

"We get about 200,000 visitors to the peninsula over the summer period. Now there are motels and hotels etcetera that can cater for about 30,000 of those so all the rest are actually staying with people who have homes. So we have to say to the homeowners that you are part of the problem causing strain on infrastructure.

"It’s just part of kiwi culture that if your mate’s got a bach you go and stay with them I guess. It does create a strain but we always cope in the end."

For anyone who has visited the townships on the Coromandel Peninsula it is appar-ent that they are at very different stages of development to Mount Maunganui. But, is it feasible that they be heading down that same path? Mickleson says there is always that risk but it depends on whether that’s necessarily good or bad.

"There are a lot of people who probably think Mount Maunganui is great and should be more developed and others who will say it’s gone too far. But at the end of the day it’s for the community to decide how much is too much. To a great degree, the district plan is steering development into those areas that the community has agreed there should be development and is trying to protect those other areas," he says.

"The other thing is changing trends in New Zealand. The days when you went to your holiday home and spent the whole time mowing the lawn and trimming the trees are gone. Today the sections are smaller because people don’t want to be spending their holiday maintaining the property. I suppose people are busier than they used to be."

So a different way of life may be behind the changing face of the New Zealand holiday and the changing character of the traditional destination. But what about those who don’t have friends with baches or have the money to buy a holiday home?

Because the popularity of these places such as Whangamata and Pauanui (the latter being coined a "playground for the wealthy elite") has driven up land value at a substantial rate, they too are becoming out of reach as holiday destinations for most families.

Camping grounds here are scarce because, like Mount Maunganui, the land is now an attractive prospect for development. And who could blame the camp-ground owners for selling out? It doesn’t take the greatest busi-ness mind to weigh up the fi-nancial benefits of accepting the developer’s cheque when he comes knocking. Especially when the only alternative is to slog it out and wait for business that only provides any substantial rewards over an eight-week season each year. Prime real estate with low returns doesn’t justify holding onto that land.

Currently in Whangamata there are three camping grounds although one has recently been sold. Mickleson says he is not sure what is going to happen with the property but predicts that in time, as land value increases, the owners will come under pressure to sell to developers.

"I think land prices will eventually squeeze out the ones in the prime locations. The one that recently sold was closest to the beach but there are campgrounds further away that may never come under that pressure. Again, I think it will come down to demand. I guess there will always be demand from people who want to go and pitch a tent in a campground but I think there’s less demand now than there was 20 years ago."

That may be the case on the Coromandel Peninsula, but if you head east across the Firth of Thames and then veer north to the coastal limit of the Hauraki Gulf you should be able to find the tiny township of Mangawhai where tenting is undergoing somewhat of a renaissance.

Mangawhai is a quiet little seaside resort nestled between the beautiful Pacific Ocean on the east coast and gently rolling farmland. About 1000 residents live here permanently but the population swells at summertime as the holidaymakers move in.

Lorraine Hartley, the owner and operator of Mangawhai Riverside Caravan Park, has lived here for eight years and has noticed "dramatic changes" over that short period. She says property, including farmland, has been "extensively" broken up into smaller blocks to be developed into holiday homes and the range of shops has flourished.

"When I first came here there was a small block of shops up at Mangawhai Heads and a very small block in the village. It’s been a gradual thing but they’ve almost doubled in size within the last four or five years," recalls Hartley.

Today, visitors can stumble across anything from boutique clothing outlets to legal advice at the local shopping centre. In addition to the four campgrounds there are also a range of other accommodation alternatives including luxury apartment rentals and bed and breakfast venues.

Hartley says that although she has noticed an increase in the number of visitors throughout the year and suggests that the mass migration at Christmas has changed from what it once was, most of the businesses still depend on the summer break.

But for all the devel-opment that has hit Mangawhai over re-cent years and all that the town now has on offer, Hartley says the traditional camping holiday is making a comeback because people still enjoy living simply.

"In the last two or three years I’ve had lots of people coming in with brand new tents saying, ‘We want to go back to doing what we used to do as kids and give our own children that experience too’," says Hartley.

"The other thing we’ve found is that Aucklanders who don’t want to get into the business of buying land and building houses are bringing caravans onto the park and they leave them here all year round. That’s the bulk of my business today.

"We have another side of business developing too though. That’s the [temporary] home park. We’ve redeveloped some sites to give more space and clients purchase their own unit, which can be up to two or three bedrooms, and they locate these on the large sites. They’re almost like a semi-permanent home and it adds a new dimension to camping."

So it seems you can still find a good old kiwi campsite – if you look hard enough – they’ve merely taken on new character just like the places and the vacations we remember from our childhoods.

However it also seems that there is no longer anything that can simply be categorised as a ‘traditional kiwi’ holiday. Times have changed and so have the lifestyles and the needs of the summer migrants.

Time has caught up with many of our holiday hotspots too, and ‘progress’ has followed it there, at varying degrees though, as you can see through the different stages of development.

But at least some things about summer will always stay the same: sandwiches will always be crunchy at the beach; some item of utmost importance will always be left at home; kids will always be carsick; holidays will never be long enough; and the mass migration will always be observed year after year after year…

Posted by Ian Wishart at 01:33 AM | Comments (0)

THE LIFESTYLE BLOCK BOOM INVESTIGATE: JUN 03

Is it the call of the wild, or something even more primal? HAMISH CARNACHAN investigates a growing phenomenon in population drift:

They call it downshifting. A word evocative, per-haps, of a steel blue Porsche 911 whipping through the mountain passes of the Southern Alps, just open space as far as the eye can see across the Canterbury plains below out to the ocean beyond, and on the roadside drifts of snow that the distant winter sun has tried but failed to claw from the alpine landscape. Downshifting, a word that spins you up in its vortex and virtually screams "escape", "freedom", "lifestyle".

If it wasn’t dreamt up by some marketing spinwizard, it should have been. Because these days they’re talking about "downshifting" in relation to lifestyle choices – kicking the big smoke bye-bye, and staking out that ten-acre block in the country you’d fantasised about owning ever since those lazy summers of your childhood.

Fed up with all that city-living entails, an alternative existence is rapidly luring an ever-increasing swathe of intransigent townies away from suburbia. Throughout the country, former city slickers are finding their field of dreams lies not amidst the corporate high rises but out in the paddocks, beyond the confines of the cityscape. They’re ditching the constraints, the hustle and bustle, of metropolitan life for the privileges country solitude can offer, and they’re finding it often at a cost considerably less than in most parts of suburbia.

These people are heading for the prospects of a better life for their families, fresh air, open spaces, bigger properties that tend to hold the pledge of swimming pools, tennis courts, and large gardens with plenty of land leftover for free-range children, and grazing horses or a small flock of sheep.

And yet, the delights of grassroots New Zealand culture are often only a stone’s throw away from the city centres. Venture out of the suburbs of any major city and you’ll come across delightful locales like Amberley on the outskirts of Christchurch, Brighton to the south of Dunedin, and Clevedon just out of Auckland.

Situated on the city fringe where suburbia melts into the rolling rural landscape, these are places where the locals live a hybridised existence influenced by their environs - close enough to commute to the city for work, far enough removed to enjoy the solitude of country life. This is the region of the "weekend farmer".

The houses, generally a mix of neatly renovated colonial homesteads and sophisticated new developments, are mostly large, with gardens immaculate. Mud splattered BMWs and Mercedes fight for parking space in the garage with late model utes and farm bikes. Timberland shoes and Red-band gumboots stand side-by-side lining the front-door foyer. Here is eclectic yet idyllic lifestyle as peaceful as any.

With more high-density housing encroaching on personal space, escalating property prices, and ever-increasing traffic congestion, pollution, crime and violence, more and more people are leaving the city in search of the ‘good life’, and who can blame them? But while rural life is the stuff many people’s dreams are made of, is the grass necessarily greener on the other side, and what of this phenomenon of lifestyle block sprawl?

For Terry and Beatrice Nuthall, leaving the city behind was everything they had dreamed of. They found their slice of paradise on a 10 acre block in the Kumeu region, another lifestyle stronghold, northwest of Auckland. With their three children having flown the nest, Terry and Bea purchased ‘Falconhurst’, an idyllic property bordered by mature macrocarpa trees and nestled amongst orchards, vineyards and a myriad of other agricultural endeavours.

The property is only a half hour drive from central Auckland – five minutes from Kumeu town centre – but it seems a world away from the city. The secluded solitude of Falconhurst is a lifestyle block at its quintessential best. A stream meanders through the middle of the section, past a generous homestead with flowing gardens and immaculately groomed lawns, protected from a small holding of stock by split-post fencing stained to match the architraves of the house.

But while the couple don’t typify the young families of ‘2.7 children and a dog’ that are heading for the hills, their motives for moving were the same – a more leisurely lifestyle. Terry says that aspect of the purchase was the greatest success and he is enthusiastic about encouraging others to pursue their dream if this is where it lies. "Get out of the dirty, cramped, car-polluted city I say."

He still marvels at some of the charms of country life that simply cannot be equalled in the city too.

"They’re simple things like when you go out you don’t have to worry about locking everything up. You make lasting friendships out of the close networking that goes on in the rural community. We even used to trade openly because people around you are all doing different and interesting things on their land. And one thing you really notice is how the locals seem to pull together to help each other out – how often does that happen in the city? I remember once I got the tractor stuck. I left it overnight and the next morning it was sitting there in the driveway."

The Nuthalls bought their property in 1997 for $800,000, which is at the higher end of the market. Still, they admit making a profit when they were forced to sell earlier this year for health reasons. Subsequently, they have retrenched to the city and though they both dearly miss what they left behind, Terry has words of advice for newcomers to lifestyle block living.

"People need to move to a lifestyle block well before they retire because there’s a lot of work involved – much more than they think. Also, the cashflow is a surprising drain. We spent around $20,000 a year on maintaining the property and machinery. You can run out of water and have to buy it in, there’s fencing material and metal for the drive, it’s never ending really," he says.

"Still, for us the positives always far outweighed the negatives."

Today there are a host of resources to help landowners come to terms with the requirements of their new investment. Lifestyle block farmers even have their own association – The New Zealand Association of Smallfarmers – formed nearly 30 years ago. It has 15 branches throughout the country and claims to represent the interests of more than 60 000 smallholders. If that network can’t provide enough information and advice then there are magazines on the subject and a multitude of websites on the Internet.

One of the most popular websites is www.lifestyleblock.co.nz, set up and operated by Kay Swann, a farmer from Brighton just south of Dunedin. In fact, Kay’s site is the second most popular agricultural website in New Zealand. She puts the interest down to the activity of the site’s discussion group where tips and hints are fired back and forth over cyber-space. The insatiable appetite for information on the subject gives some indication of how popular lifestyle farming has become.

Kay emigrated to New Zealand from England 12 years ago and lived in the Waikato until purchasing her 14 acre lifestyle block and moving south last year. She now runs a small herd of cattle on her land, breeding them for the gourmet veal market "more as a hobby" than anything else.

"You never going to make a lot of money," she says. "I think most people get a lifestyle block because they want more room for their families, their kids, their dogs, maybe a couple of ponies.

"There seems to have been a change in people’s values. They’re seeing that there’s more to life beyond the city. Also, with the advances in the Internet and technology these days, people are a bit more flexible - they don’t have to be living right on the office doorstep."

Like Kay, many of her close neighbours are from Europe and the United States. "They’ve come out here following a dream", she says, one that is too costly back in their native countries.

And they, like many Kiwi dreamers, are often unaware of the issues that affect lifestyle block owners here. She says that water supply is becoming a problem in some areas because the increasing development of farmland into smaller lots is draining bore water levels.

"The lifestyle people don’t have the network of support that the farmers do. People find it hard to get hay and when we have a drought, like we have had down here, we can’t organise to get feed from the North Island like they do.

"Conventional farmers often get tired of constantly being asked for help and advice. They also tend to think that people living on lifestyle blocks don’t look after their animals and cause a lot of animal welfare issues. I think that’s mainly through ignorance but the two don’t tend to blend. That’s why you find the lifestyle blocks grouped together in the same areas."

Kay also suspects the dream often overshadows the practicality of small farm ownership.

"Most people go into it not really understanding what’s required. People have a rosy picture of the country and they’re not really aware of the negative side of it. You have farmers’ dogs barking at all hours, the smell of silage, low flying crop-dusters – it’s not always as peaceful as they imagine.

"There are statistics that show the average length of time people stay on a lifestyle block is five years. The main reason they leave is because they weren’t aware of how much work and responsibility is involved, or one partner gets fed up with it and tells the other, ‘This is you dream – not mine’."

However, many still seem willingly to give it a shot. The latest statistics from the Real Estate Institute of New Zealand (REINZ) show the lifestyle block sector is one of the star performers in the property market with both values and sales volumes consistently experiencing strong and healthy growth.

Three years ago 503 lifestyle properties were sold nationwide for a median price of $185,000. The five regions with the highest prices were all in the top half of the North Island. Bay of Plenty properties were the most expensive, followed by Auckland, Northland, Waikato and Gisborne.

In March this year, 716 blocks sold for an average price of just under $250,000, but the figures show the market has moved. Auckland is on top, followed by Marlborough, Otago, Waikato and Wellington. If you had a purchased a section in the Auckland region in March 2000, at the average price of $252,000, and sold it in March this year you would have made yourself close to a cool $100,000 profit. And today you’ll be forced to fork out $314,000 on average for a section on which to set up a boutique vineyard in Marlborough.

The rural spokesperson for the Real Estate Institute of New Zealand, Murray Cleland, says the level of sales is currently limited only "by a distinct shortage of listings".

In areas such as West Melton, Canterbury, where traditionally there have been an abundance of ‘bareland’ blocks priced from $100,000 upwards, the Bayleys property group say it is now difficult to find such a section for sale. Prices of $150,000, and over, are reportedly commonplace today. Bayelys says strong demand from migrants, particularly from the United Kingdom and Europe, is one of the drivers of this market.

While the market has shifted further south in recent years, Auckland hasn’t slipped below second place on the standings. One of the strongest performing markets in this region is the area northwest of the city. Sales Manager at Bayleys North West Auckland Margaret Curnow says she has noticed a steady increase in the demand for lifestyle properties in the region over the past four or five years.

While she says that demand is predominantly being driven by families seeking a life in the country, "more and more people who work out this way, particularly in the growing Albany business area, want to avoid hours of travel."

Most of the lifestyle blocks being sold in this area are subdivisions of larger chunks of land and concerning for some is the fact that, as Curnow admits, "most people we work with just mow it."

"What they want," she says, "is country life and space without the work."

Some farmers in the ‘right’ locations, like northwest Auckland, are finding the property market more alluring than fluctuating meat and wool prices. So, with subdivision becoming more profitable than traditional land use in some areas, what effect is this having on the productivity of the conventional farming sector?

Well, there’s not a great deal known about the phenomenon, which is part of the reason why the Ministry of Agriculture and Forestry (MAF) is about to commission an extensive study on the subject.

One MAF spokesperson says at present no one even knows exactly how many lifestyle units there are in New Zealand – it is approximated to be between 90,000 -110,000.

"We’ve done a number of broad consensus studies on commercial properties but we don’t have a handle on lifestyle blocks."

He says the study, which is expected to be out in June next year, should help clarify the economic impact small farms are having on the economy, if any, as well as what use the land is being put into and what previous land use the blocks have been formed from.

Five years ago a similar study was conducted, but that was done on a regional, not a national, basis. MAF carried out the survey, in conjunction with the Bay of Plenty Regional Council to look at productivity and land use on lifestyle blocks in the western Bay of Plenty region.

What they discovered was that "for every pony paddock put up, a glasshouse was built too", suggesting that there was probably no net loss of productivity.

Phil Journeaux, one of the authors of the study, says it was hard to assess the effect on overall productivity because of the many variables.

"The land had come out of sheep and beef farm property and gone into a myriad of uses. Initially our findings showed a 2–3 percent increase in productivity but when we scrutinised our methods and went back over some of the issues we discovered a 2-3 percent decrease.

"The other thing the study showed was that the smaller blocks, less than 2 hectares, tended to go into glorified gardens with a couple of cattle and few sheep. Quite clearly, those cases would contribute to a productivity drop."

But, as MAF sources points out, often productivity is increased on small farm lots because, in the case of glasshouse horticulture for example, it is a more economic form of land use with outputs significantly greater than traditional grazing. Still, they caution about drawing national parallels from the Bay of Plenty study because some regions are better suited to a certain type of land use than others, each of which vary in efficiency.

While the jury is out until next year on whether or not the increasing demand for lifestyle blocks is affecting mainstream agriculture, there are more tangible concerns. Some farmers, whose properties border the expanding lifestyle belt, say inflated land valuations, which are being fuelled by a growing demand for rural property, are hiking up their rates.

One farmer in the Coatesville-Riverhead area northwest of Auckland is reported to have had his rates increase by more than 100 percent in a year. The owner suspects a valuation based on his property’s potential for subdivision is behind the massive rates rise. Though that was for a 40-hectare property, similar increases have reportedly whacked lifestyle block owners too. Federated Farmers fear that such an escalation in council rates charges means farmers will have less money available to invest back into productivity and income returns.

Environment Waikato Regional Council has even warned that existing farms in the district need protection from the encroachment of lifestyle blocks. Contrary to Kay Swann’s comments about the negative impacts of conventional farming on small farm owners, Councillor Neil Clarke says he has sympathy for farmers when lifestyle blocks are established close by.

"There needs to be some form of indemnity for people buying lifestyle blocks close to farms. They could sign a document noting that they understand the nature of rural living, just as coastal property owners signed waivers when they lived in coastal hazard zones."

But Murray Cleland of the Real Estate Institute believes the increasing popularity of lifestyle blocks is having a positive effect on the rural economy. He says it has contributed to an influx of people and capitol into local businesses, both services and retail, and "adds a lot of colour to the New Zealand rural experience".

It will be some time before we truly understand what effect the lifestyle block explosion, currently carving up tracts of prime agricultural landscape, is having on the backbone of the nation’s economy. However, now, and in the immediate future, it seems certain that the irresistible prospect of the ‘good life’ will show no sign of losing its appeal to those who can afford it. It’s just a question of whether the transition to a country life is really all that it’s made out to be.

Posted by Ian Wishart at 01:12 AM | Comments (0)