Today, Labour leader David Shearer told TVNZ's Q+A programme the policy would put a halt on foreign speculators coming into the housing market and pushing the prices up.
"We're going to restrict, almost totally, foreign ownership, to buy established houses that are here.
"What we want to do is to make sure that first home buyers are Kiwis and they have the best chance."
New Zealand was one of the few countries in the world that allowed foreign ownership of established houses, he said.
The policy mirrored Australian housing policy, Mr Shearer said.
The party would allow foreigners to build houses here because that "increases the housing stock", he said.
Property commentator Olly Newland said the policy would not work.
Australians would be exempted from the scheme, because of a reciprocal arrangement where New Zealanders were able to buy properties there.
Mr Newland said that made the policy "a bit of a nonsense" because Australians bought the highest number of properties here of all foreign buyers.
"Secondly, of course, any overseas buyer would very quickly find somebody else to buy a house for them here in their name and hold it in trust for them.
"There are a thousand ways to get around it if they want to come here," he said.
"It sounds good but in practice it just won't work."
Real Estate Institute of New Zealand chief executive Helen O'Sullivan said she was interested in knowing more details behind the policy.
"At first blush it sounds very simple but the devil will be in the detail."
She was interested to know how the policy would be enforced.
"The biggest issue for real estate agents would be the workability of it, so would you be needing to ask for passports at open homes?"
Green Party leader Russel Norman has welcomed the policy and believed it would make a "significant" difference to first home buyers.
The policy was in place in a number of other countries and worked well, he said.
"There will always be people who try to get around the law, but that doesn't mean that you don't have rules in place."
He denied the policy was xenophobic.
"If you want to come here and live here and become a permanent resident or citizen, then you would be eligible to buy houses."
Foreign buyers had already bought a number of houses that had pushed up the price of real estate here, Dr Norman said.
But he said it wasn't too late to change the real estate landscape.
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The statistics
* 9 per cent of NZ houses sold to foreigners (people who do not live here)
* 22 per cent of that number are Australians
* 20 per cent are Chinese
* 13 per cent are British
* 14.8 per cent - The amount average Auckland house prices rose in the past year
* 39.1 per cent - The amount prices have risen since the end of 2008.
(Source: BNZ-REINZ Residential Market Survey/Tony Alexander)
