New Zealand has passed a law that will ban most foreigners from buying property in a bid to tackle runaway house prices.

The bill will still allow foreigners to buy new apartments in large developments and multi-storey blocks. Existing homes remain off limits to non-residents, but people from Australia and Singapore will be exempt from the ban, due to free-trade rules.

Chinese residents are the most common property-buying foreigners, followed by those from Australia, Britain, and Hong Kong.

“This is a significant milestone and demonstrates this government’s commitment to making the dream of home ownership a reality for more New Zealanders,” Associate Finance Minister David Parker said.

A report published by ABC News said foreign ownership has attracted criticism in recent years as New Zealand grapples with a housing crunch that has seen average prices in the largest city Auckland almost double in the past decade and rise more than 60 per cent nationwide.

Figures released by the Real Estate Institute of New Zealand on Wednesday showed median house prices had slipped 1.8 per cent to NZ$550,000 ($498,600) in July from the previous month, although they were still 6.2 per cent higher than the same time the previous year.

Where should the line be drawn? Chief Executive Officer, Greg Bader said that while Australia had seen a slow-down when lending rules tightened on the sales side, the country is only now beginning to see some green shoots in terms of pressure on rental prices.

What do you think? Does Australia need to take the same (or similar) steps as New Zealand? Share your thoughts in the comments below.