He said it was strange but fun to be back at the set, originally the idyllic home of Bilbo and Frodo Baggins.
The rebuilding of The Shire for the next two films, The Hobbit: An Unexpected Journey and The Hobbit: There and Back Again, means the set's 44 "Hobbit holes" built into the hillsides of rolling farmland will now be left intact permanently.
"It's fantastic that it can stay here because our film sets are always built out of polystyrene and they go off to the tip. So I'm actually thrilled that a set like this which is so gorgeous and beautiful and the setting is so fantastic can stay here - it's all been built out of permanent materials."
However shooting of the film, which boasts a crew of around 3000, almost didn't go ahead after industrial action by an actors' union last year nearly hobbled the project.
Sir Peter said Warner Bros, the studio behind the prequel, scouted the United Kingdom including Scotland to relocate the movie because of the argument over pay and conditions.
"They were literally preparing to move the film ... which was freaking me out."
He said if New Zealand wanted a thriving film industry it had to compete, most likely with incentives to lure film-makers, but the return could be rich.
"If you want to be in the game you've got to either play it or not. The concept of what these films bring to the country plus the amount of employment, they are pretty formidable figures. This is a pretty big-budget film."
He said it was not an endorsement of Prime Minister John Key, who was onsite to meet him, despite the Government stepping in last year to offer Warner Bros financial incentives for the $500 million production.
"I'm not a political guy. I support the film industry and I support people who want to work in the film industry," Sir Peter said.
Instead it was the young son of the family which owns the Hobbiton farm who gave Mr Key his lesson in politics.
He proudly presented the Prime Minister with a Hobbiton cap, only to then demand it back again.
Mr Key handed it over, and told the boy: "This is a bit like politics - sometimes we give things, sometimes we take them away."
The pair announced that the world premiere of The Hobbit: An Unexpected Journey, would be held in Wellington in November next year.
Sir Peter said the incredible reception given to a red-carpet premiere of an earlier Lord of the Rings movie meant industry insiders were keen for New Zealand to screen The Hobbit first, ahead of a world-wide release on December 14, 2012.
