Two major banks have placed heavy restrictions on lending to foreign borrowers who want to buy New Zealand homes, effective from today.
Westpac will no longer lend to non-resident borrowers with overseas income, and ANZ has also imposed a range of tough new requirements.
Westpac said it would only accept borrowers on temporary resident visas if they had both a New Zealand address and New Zealand-based income.
More today on the housing market
The bank would also require New Zealand citizens and permanent residents with overseas incomes to have at least a 30 percent deposit, up from 15 percent.
It had had trouble in the past verifying foreign applications, it said.
"The tightening of policy reduces risk and will contribute to further strengthening our home lending portfolio with customers who we have a deep and long-term banking relationship with."
As part of ANZ's new requirements for borrowers relying on overseas income, the bank would only lend to people who planned to live in the houses they bought.
It would not be offering any interest-only lending, or loans for "bare land or construction", and lending would only be available to individuals.
The bank said it would honour pre-approvals, and there were exemptions.
"A New Zealand passport holder living abroad purchasing a property funded by overseas income is exempt from this overseas income policy, and normal credit criteria apply".
It said it was making the changes to ensure it was "appropriately positioned" in the current housing environment and was taking into account "supply pressure in certain areas".
Westpac, and other major banks, made similar moves in Australia in April.
Housing Minister Nick Smith said he was not worried, saying banks were entitled to make their own decisions and the government did not tell them who they should loan money to.
"They should make the decisions based on their obligations they owe to their deposit holders to ensure that they are wisely managing that money."
Labour finance spokesperson Grant Robertson said the move showed the banks were acknowledging the housing market was out of control, and foreign speculators were playing a big role in that.
"Meanwhile, National has refused to even acknowledge there's a housing crisis and has its head in the sand over the involvement of foreign buyers in the market.
"It's the goal of a bank to make money from mortgage lending. If they are pulling back from lending on New Zealand housing, then there really is a crisis in the market."