Housing prices in Auckland have skyrocketed in recent years. Source: News Corp Australia

NZ prime minister John Key announced the measure today and it will only apply to homes that are not the seller’s main residence.

The country has been looking at ways to take the heat out of the Auckland property market, where median prices for a home have risen by 60 per cent since 2008.

“It’s not unreasonable to expect that if you buy an investment property and sell it for a gain within two years, then you should be taxed on that gain,” Mr Key said.

But Associate Professor Mark Crosby, of Melbourne Business School, believes the 33 per cent tax is a clumsy way of tackling a hot housing market.

“I think this is a poor policy, and I wouldn’t be surprised to see this policy quietly dropped within a year or two,” Prof Crosby said.

When asked if it would be a good measure to introduce in Australia, Prof Crosby said figures on housing turnover collected by the Reserve Bank suggested about 7 per cent of the 500,000 Australian dwellings sold in 2011 were held for less than two years.

“Those selling within two years tend to be younger people, and it is hard to tell, for example, how many of these sellers might be foreign speculators, but there doesn’t seem to be any evidence that foreigners are more likely to flip properties than local residents,” Prof Crosby said.

“So the tax will hit those who are forced to sell for whatever reason, rather than targeting any particular group. It is also unlikely to have much effect on house price growth.

“Buyers will simply hang on for two years and then sell, rather than selling inside that window.”

The New Zealand Government has been under increasing pressure to control foreign speculators buying properties in Auckand, with the NZ Reserve Bank estimating that investors accounted for about 40 per cent of house sales in the city last year. While it does not know how many of these were non-residents, the Green Party believes they could be driving up prices.

Foreign buyers being blamed for high prices in Auckland. Source: News Corp Australia

“Foreign buyers are treating the Auckland housing market like a restaurant buffet — they’re going back for second, third and fourth helpings,” Green Party housing spokesman Kevin Hague said.

“Every house a non-resident speculator snaps up is a home an Aucklander can’t own.”

The New Zealand dollar fell after the government stepped up measures to curb Auckland’s bubbling housing market, stoking speculation the move would free up the Reserve Bank to reduce interest rates.

The Kiwi dollar dropped to 74.26 US cents at 8am in Wellington, from 74.72¢ at the New York close and 74.74¢ at 5pm in Wellington on Friday.

The government announced on the weekend that it would give the Inland Revenue Department an extra $29 million in this year’s budget to chase property investors.

It will also tighten rules on investment gains and link transactions to IRD numbers while it assesses a withholding tax for foreigners, in a response to the growing fears about the pace of Auckland house price inflation.

“The New Zealand dollar has opened lower this morning on news that the government is also increasing measures to cool the housing market,” ANZ Bank said.

This is expected to give the NZ Reserve Bank additional freedom to reduce interest rates as it eyes weaker dairy commodity prices and an elevated currency.