Legislation barring non-citizens from purchasing property is being introduced today and is expected to come into effect in the New Year.
The country’s government said the policy would stop young people being priced out of the housing market.
Housing Minister Phil Twyford said: “Purchases of homes by offshore speculators push first home buyers and families out of the housing market.
“The previous national government said it couldn’t be done without breaching trade agreements.
“They just didn’t try and in doing so, they put foreign buyers ahead of New Zealanders.”
He said: “Our view is that house prices should be set by New Zealand buyers and sellers, not by being treated as an investment asset for overseas speculators.”
The change will see overseas buyers banned from buying homes unless they intend to increase the number of residences and see them on or convert it to another use.
Permanent residents and Australians will be exempt from the scheme, provided they have lived in the country for at least 183 days.
New Zealand’s housing market had been a key battleground in the country’s election.
And its new Labour government, led by Prime Minister Jacinda Ardern, has promised a new protectionist stance for the nation.
Minister for finance, Grant Robertson warned this month: “The market for housing in New Zealand is completely broken.
“The price of land and building has been increasing exorbitantly while the level of building of affordable homes has dropped off enormously.”
Homelessness rates have also spiked in recent years, climbing to some of the highest rates in the developed world.
A recent Yale University report showed nearly 1 per cent of the population – around 40,000 people – did not have a proper home.
However, there has been criticism of the government’s policy amid doubts over how effective it would be.
Government figures show only around 3 per cent of homes sales are made to foreigners.