Peter Jackson scoured the vast lands of New Zealand on a chopper and found the Russell farm in Auckland. It was exactly what he needed, a lake in the middle of lust pastures. This magical location can be found in the heart of the Waikato region.
The scene that captured the attention of Sir Peter Jackson.
In one particular part of the farm, a magnificent pine tree towered over a nearby lake, adjacent to a rising hill. Bag End now sits atop that hill, overlooking the Party Tree, as that pine would later be known. The surrounding areas were untouched; no power lines, no buildings and no roads in sight. This meant that Sir Peter Jackson could leave the 20th century behind, and fully submerge himself in the fantasy world of Middle-earth™. (Source:http://www.hobbitontours.com/our-story/)