CONCERNED: NZ Chinese Association president Virginia Chong says policy to restrict foreigners from buying New Zealand homes is ‘‘potentially racist’’.

The president of a nation-wide organisation that represents Chinese migrant groups says David Shearer's policy is "picking on" Asian people.

Labour leader David Shearer says the party will restrict the ability of non-residents to purchase New Zealand houses as part of its package to help Kiwi first-home buyers.

Shearer says IRD records show more than 11,000 overseas investors own New Zealand properties they don't live in.

"This policy will reduce demand and help take some of the heat out of the market. It will put Kiwi buyers at the front of the queue," he says.

However, the president of the NZ Chinese Association Virginia Chong is concerned the policy is targeting Asian buyers.

Chong says there is a flawed perception that Chinese nationals are out-bidding Kiwis in the Auckland housing market.

The second generation New Zealander says people just see Asian faces in the auction rooms and assume that they are foreigners.

"It's all very well saying it's Asians who have pushed up the price but I don't think it's Asians, we are just a convenient fob-off," the Epsom resident says.

She says while the policy may be a Band-Aid on the problem, it will not have any long-term effect.

"From my perspective it's potentially racist and it's contrary to existing free trade agreements," she says.

Shearer says the bill would closely follow the Australian model, where foreigners can buy land and build houses.

"By itself this is not a silver bullet for housing affordability, but it is part of the solution," he says.

The policy sits alongside the party's Kiwi-build policy to construct 100,000 affordable homes over the next 10 years for first-time buyers.

"Together these policies will increase the supply of entry level housing and reduce speculation-driven demand."

The Green Party is supporting the move to make housing more affordable for Kiwis.

"This is a sensible measure that will help reduce demand and lower prices meaning more New Zealanders can own their own home," co-leader Russel Norman says.