Labour leader Andrew Little says the Reserve Bank should target property speculators to ease the pressures on the housing market, but only in Auckland.
Mr Little said residential property speculators were shutting people out of home ownership, and he wanted new rules which required investors to pay a bigger deposit for each new property they purchased.
The Reserve Bank introduced more restrictive lending rules in 2013, which helped ease housing pressures. The rules were designed to stop banks lending home-owners more than 80 per cent of the value of a house.
Mr Little said there was no reason why a variation on these rules could be applied to residential property speculators in Auckland.
"[The Reserve Bank] should look at an escalating level of lending restrictions to those buying subsequent properties.
"So, for your owner-occupied house, the standard rules apply. Your second property, a higher level of equity by the purchaser is required, and then with the subsequent property another high level of equity.
"I think those sorts of things act as dampeners for those who are in the housing market to snaffle up properties, hold them for a few months and bank the gain once they sell it."
He said such rules should apply only to speculators, not "mum and dad investors" and only in Auckland, where housing pressures were worst.
"There is no point in a family trying to buy a house in Wanganui, where house prices are dropping, being subject to lending restrictions designed to lower house price inflation."
The Reserve Bank's deputy governor Grant Spencer said yesterday that house price inflation had risen 17 per cent in the year to March.
Since September, the pressures on housing had become "more accentuated, particularly in Auckland where the supply shortage is greatest".
More than a third of house sales were now going to investors, and Mr Spencer said more restrictive measures for investors could help cool the overheated market.
The bank is consulting on potential moves to make it harder or more expensive for residential property investors to get bank loans.
Housing Minister: No simple fix for housing shortage
Housing and Building Minister Nick Smith said there was no simple fix for the housing shortage.
Speaking to the Herald at a public meeting in Henderson last night, he said: "The Government has consistently been saying that we need to free up more land, we need to do more efficiency in terms of house construction, we need to get the compliance cost down, we need to put more pressure on the pricing of materials, and as well as all that, we need to give some help for people to get a deposit together."
He supported the Reserve Bank's plan to maintain restrictions on lending, saying that to lift the loan-to-value limits would risk economic instability.
Dr Smith ruled out any restrictions on property purchases by foreigners, saying this was not having a significant influence on the New Zealand market.
"The key reason that house prices in Auckland have gone up is that over the last 15 years we've been building only an average of about 6,000 homes per year, when the population growth has required more like 15,000 homes per year."
He downplayed the potential impact of a foreign buyer's register, saying it had failed to solve housing affordability problems in Melbourne and Sydney.
He also said the belief that foreigners were snapping up Auckland properties was wrong.
"In a city like Auckland, when you have over 40 per cent of the people who are not born in New Zealand, simplistically saying 'I've been to an auction and some people spoke Chinese - they must be foreigners', is actually not correct. We have a large number of people living in a city like Auckland, which English is not their first language, but they are citizens and residents."
The minister is holding a series of meetings around the country to promote Government's incentives for first-home buyers.
The Kiwisaver HomeStart roadshow meetings will next be held in Nelson and Christchurch.