Prime Minister Jacinda Ardern and Trade Minister David Parker announce the ban on foreign investors in the residential housing market

A curb on foreign purchases of New Zealand property has passed into law, with the Government adamant the changes will help Kiwis get back on the property ladder.

The Overseas Investment Amendment Bill passed its third reading in Parliament on Wednesday night by 63 votes to 57.

The Government announced in October that it would end the purchase of existing houses by classifying them as "sensitive" under the Overseas Investment Act, and introduce a residency test.

GETTY IMAGES In June last year around 82 per cent of houses in the New Zealand were being bought by residents or citizens, with another 16 per cent of sales to businesses or corporate entities, almost all of which were wholly owned by New Zealanders. Around 2 per cent of housing was purchased by owners without NZ citizenship or residency, with Chinese and Australians making up the biggest share of off-shore property buyers.

The Overseas Investment Amendment Bill would stop overseas residents from buying most types of homes, except for new apartments in large developments and multi-storey blocks.

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Existing homes will remain off limits to non-residents but people from Australia and Singapore will be exempt from the ban due to free-trade rules.

MONIQUE FORD/STUFF David Parker talks about the relaxed foreign buyers ban.

The Government has said the new law is part of its plan to remedy New Zealand's housing shortage and address the declining rate of home ownership.

Labour's Deborah Russel told the House on Wednesday the bill would "ensure New Zealanders retained their birth right", while ACT leader David Seymour said it was "the stupidest bill I've seen in years".

Trade and Economic Development Minister David Parker, who is responsible for the bill, said the "significant milestone" would help make the dream of home ownership a reality for more Kiwis.

TOM LEE/STUFF Trade Minister David Parker announced a relaxing of the foreign buyers ban in June.

"This Government believes that New Zealanders should not be outbid by wealthier foreign buyers," he said.

"Whether it's a beautiful lakeside or ocean-front estate, or a modest suburban house, this law ensures that the market for our homes is set in New Zealand not on the international market."

But Parker has said previously that changes to the housing market would be marginal.

ROSS GIBLIN/STUFF The Government announced in October last year it would introduce a foreign house buyers ban.

If New Zealand signed up to the Trans-Pacific Partnership (TPP) trade deal before passing the legislation it would eliminate the right to enforce the ban, he added.

In June, Parker announced plans for the ban had been relaxed to allow investors to buy apartments after pleas for tweaks poured into Parliament before the submissions deadline earlier this year. The select committee considering the bill recommended developers still have access to enough capital to fund their developments.

In the same month, Stats NZ data showed just over three per cent of houses sold or transferred in the March quarter went to foreigners. That dropped back to 2.8 per cent by June.

The proportion of overseas sellers also increased in the March quarter, to reach 1.5 per cent, but has dropped back down to 1.2 per cent.

Real Estate Institute of New Zealand (REINZ) chief executive Bindi Norwell said foreign buyers only made up a small portion of the market, and the outcome was disappointing in light of the latest statistics.

"We don't believe that banning foreign buyers from purchasing property in New Zealand is going to have any impact on house prices, nor will it help young people into their first homes.

"Increasing the level of supply, speeding up the consenting process, creating consistency at councils around New Zealand and reducing LVR restrictions for first time buyers are all more appropriate measures that will help with affordability ahead of banning offshore investors."

The Government said the Overseas Investment Amendment Bill had streamlined the approval process for the purchase of residential land for commercial purposes, such as supermarkets, hotels, dairies and direct investment in forestry.

New screening requirements will start within two months following Royal assent.

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