Prime Minister John Key says signing up to the Trans Pacific Partnership could stop the Government from banning house sales to non-residents, but alternative measures including a stamp duty or land tax could still be introduced.
Mr Key yesterday attacked Labour's "confused" stance on the TPP, saying the party no longer knew what it stood for and its caucus appeared to be split on the 12-nation agreement.
Labour announced its position last week, saying it would support the TPP only if several conditions were met, including a ban on foreign purchases of residential property.
Mr Key said that if New Zealand signed the TPP, it would not be able to ban foreigners such as American film director James Cameron from buying more property. Even if it was possible, he said, there was no appetite for it.
"I don't want to ban foreigners from buying residential property," he told TVNZ's Q+A. "I don't think that's actually good public policy that works."
But he said the Government would need "tools in the toolbox", and these could include land taxes on non-resident buyers.
He would also not rule out a stamp duty, which is a set surcharge on purchases by non-residents used in Britain and parts of Australia.
Mr Key said he thought these measures would be possible under the TPP, though the deal had not been finalised.
He also took a shot at Labour's "deeply divided caucus".
Labour leader Andrew Little said the party's TPP policy "had been the subject of discussion by caucus" and the final position had been agreed to by all members.
"We're a party that supports free trade. We have considerable concerns about the TPP. And so none of that is inconsistent ... what I don't support is an agreement that goes beyond just market access and has the potential to interfere with out national sovereignty."
Labour's other conditions for supporting the TPP included the protection of Pharmac.