Auckland's houses continue to sell for very high prices, and the city needs to build up, and out, the IMF said.

The New Zealand economy is in a good place, but it should drop its plan to ban foreigners from buying houses.

Speaking to Radio New Zealand, the International Monetary Fund's (IMF) Mission Chief for Australia and New Zealand Thomas Helbling said foreign buyer bans overseas had not worked.

Putting controls on capital flows into the country, which New Zealand depends on more heavily than most developed countries, were only appropriate where there were very large, disruptive inflows of money.

STUFF Finance Minister, Grant Robertson, shown here with Transport Minister Phil Twyford, said: "“The IMF’s Article IV report praises the Coalition Government’s economic plan. It also provides a set of independent forecasts which indicate growth of about 3 per cent a year over the next five years on the back of new, growth-friendly policies."

"When you look at the statistic for New Zealand as a whole, and even Auckland as a whole, the role of foreign buyers is much less prominent," Helbling said.

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Instead, New Zealand should focus on boosting housing supply, including by bringing more land into development, and densifying cities like Auckland.

IMF The International Monetary Fund aims to foster global economic growth and stability.

The IMF, which was founded in 1944 to foster global growth and economic stability, praised the government eliminating tax breaks for property investors.

In its report on New Zealand, released on Tuesday, the IMF noted the risks to the government's KiwiBuild programme, but appeared to praise the government's efforts to restore housing affordability.

"Directors concurred that the ambitious housing policy agenda centered on strengthening supply and lowering tax distortions will help to restore broad-based housing affordability," it said.

STUFF A new dawn for Auckland. The city has to densify, and more city dwellers will have to live in high-rise and multi-unit developments.

"They emphasized that the success of the agenda will depend on well-coordinated progress of the KiwiBuild program and the Urban Growth Agenda across the public sector."

But, the report said: "Many Directors noted the proposed ban of residential real estate purchases by non-residents, which is assessed as a capital flow management measure under the Fund's Institutional View, and encouraged the authorities to reconsider the measure."

The primary reason for their opposition was that the IMF did not believe banning foreigners would work, based on its failure to bring down prices in other countries like Australia.

It could, the IMF implied, send a message to the rest of the world that New Zealand discriminated against foreign investors.

The report concluded: "They considered that this measure would be unlikely to improve housing affordability, while the broad housing policy agenda, if fully implemented, would likely address most of the potential problems associated with foreign buyers on a non-discriminatory basis."

But, despite the majority view at IMF, which is sometimes criticised as having a neo-liberal economic agenda, not everyone there believed the measure would actually have any impact on the foreign flows of capital into the country that New Zealand so depends on.

"A number of directors, however, saw merit in taking into account the social and political economy considerations in the assessment, or did not think that the proposed ban would have a material impact on the balance of payments," the IMF report said.

Key risks for the New Zealand economy came from a global move towards protectionist trade policies, and also a worsening global economy.

"While the outlook remains favourable (for New Zealand) and near-term risks are broadly balanced, medium-term risks are tilted to the downside including tighter-than-expected global financial conditions and growing protectionist policies in other countries."

New Zealand was in a good position to invest in its future.

"The strong fiscal position provides space to accommodate the needs from robust population growth, while the pace of debt reduction envisaged in the FY2018/19 budget is appropriately ambitious," it said.

The IMF encouraged New Zealand to increase spending on infrastructure, human capital development, and public services that would lift the economy.