Labour's housing policy to restrict house sales to foreigners could be at odds with New Zealand's Free Trade Agreement with China.
The policy, announced by leader David Shearer yesterday, would bar foreign non-residents, except Australians, from buying existing houses in a move to reduce house prices.
Constitutional lawyer Stephen Franks said that under Article 138 of the NZ China Free Trade Agreement, Chinese house buyers must be treated the same as New Zealanders after acquiring residential property but the protection did not extend to prospective buyers.
Article 139 requires that Chinese investors be treated no less favourably then investors of any other country.
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Mr Franks said Labour's policy was a direct breach of Article 139 in treating Australian investors more favourably than Chinese investors.
"Chinese would-be investors do not get direct rights to insist on investor equality, but they can't be treated worse than Australians,'' he said.