Foreigners are to be banned from buying property in New Zealand in a bid by the newly elected Government to cool soaring house prices.

However, Prime Minister Jacinda Ardern has confirmed that expats will not be banned as long as they have permanent residency status.

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Property prices have been soaring in recent years due to a shortage of supply and low interest rates in general but there has also been an increase in foreign buyers, particularly from Australia, China and other Asian countries.

Wealthy foreigners see New Zealand property as a safe haven investment and it has left some locations, such as Auckland, with a severe shortage of homes for sale.

The latest data from the Real Estate Institute of New Zealand (REINZ) shows that it is not just in Auckland that prices have been rising. In the year to September 2017 the national median price has increased by 3.9% to $530,000.

The median price in Auckland is $850,000 although there are indications that the market is cooling as the index data shows prices are now down 3.2% year on year, the biggest fall since December 2010.

Excluding Auckland the median price is $440,000, an annual rise of 8.5% with some areas seeing much higher growth. For example prices were up 14.4% in Otago, 11.5% in Manawatu Wanganui and 9.9% in Waikato. Even in Canterbury, where the housing market was depressed by the earthquakes a few years ago, prices have increased by 4.7% year on year.

Foreign ownership and a housing shortage in New Zealand's bigger cities were prominent issues in the run-up to the September election, which saw the end of nine years of rule by the conservative National Party.

‘We have agreed on banning the purchase of existing homes by foreign buyers,’ Ardern said shortly after her election, adding that the Overseas Investment Act will be strengthened and a comprehensive register of foreign owned land and housing set up.

The Government is also looking at introducing some kind of rent to own scheme or similar progressive ownership model to help more people get on the housing ladder and a new Housing Commission will be established.

The aim is to build more affordable houses for first time buyers, banning foreign speculators from buying existing homes and increasing the number of state houses built for families in need.