However, he said, if the not-for-profit provider did buy homes here the contract would be based on Horizon's ability to provide social housing - and there would be no clauses on where earnings should be reinvested.
"We don't have those conditions for other charities. There are many charities and not-for-profit organisations that raise money in New Zealand, and they expatriate it to other countries for other charities or causes."
Mr Key said the net flow of money was likely to be in this direction.
"They would have to export capital to New Zealand, to fund at least the deposit part of what they are doing. And that, arguably, is capital that was earned in Australia."
The Government's initial objective was to sell the houses to community service agencies, such as housing trusts or church groups or iwi. However, the demand has not been high and the Salvation Army and Methodist Mission Aotearoa washed their hands of the sell-off.
Labour leader Andrew Little has said there is no rational explanation for the Government allowing Horizon to buy state houses, calling it "another state asset sale for the benefit of overseas owners".