The Hobbit to be shot in New Zealand, home of Lord of the Rings trilogy

The announcement follows two days of talks with Hollywood executives over whether the Lord of the Rings prequels, based on books J.R.R. Tolkien written over 50 years ago, should be shot in the country.

Warner Bros and New Line had considered taking the production elsewhere after acting unions threatened to boycott the films in a row over wages.

"I am delighted we have achieved this result," PM John Key was reported as saying. "Making the two Hobbit movies here will not only safeguard work for thousands of New Zealanders, but it will also follow the success of the Lord Of The Rings trilogy in once again promoting New Zealand on the world stage."

All three films in the Lord of the Rings blockbuster trilogy were shot in New Zealand, the homeland of their director Peter Jackson.

The decision follows in the wake of protests as hundreds took to the streets earlier this week to voice their objection against the possibility of moving The Hobbit elsewhere. Filming on the two-part prequel, which Jackson will direct, is set to begin in February.

British actor Martin Freeman was ‘outed’ as the actor who will play the ‘lead character’ of the two-part prequel, Bilbo Baggins, originally played by Ian Holm in the original films.