The minister responsible for planned laws to curb residential property sales to foreigners, David Parker, says it is impossible to work out how they will affect the New Zealand housing market.
But he insisted there would be no crash in prices.
He said the changes would reduce demand for housing and that would reduce house prices "at the margins".
The level of supply and cost of building had a greater impact on prices.
However Parker acknowledges that compared to what Labour has proposed in the election campaign, the Overseas Investment Amendment Bill, which has just been reported back to Parliament, was "looser".
Deputy Prime Minister Winston Peters says changes to the bill banning foreign speculators from buying New Zealand property is not a softening but a "smartening" and "refinement" of the legislation.
The bill will regulate who can buy New Zealand housing by bringing residential land into the category of "sensitive land" under the Overseas Investment Act 2005.
Under proposed changes, Singaporean residents would be exempted from the new restrictions to comply with the terms of New Zealand's Closer Economic Partnership signed in 2000.
Among the other changes, foreigners holding study and work visas will not be subject to restrictions originally proposed and overseas investors will be able to invest in apartment buildings and hotels with more than 20 units without having to sell them when they are completed.
"Our rule essentially is if you the right to live here, you've got the right to buy here," Parker said.
New Zealand had finalised an agreement with Singapore in the past week which said if there was a material increase in New Zealand houses being sold to their overseas investors, the matter would be reviewed.
He told reporters it would be impossible to model the effect of the changes on the housing market.
"It will make less of a difference now than it would have three or four years ago when there was a more relaxed capital account for outwards capital flows from China," he said.
The rules around apartment ownership had been loosened because the Government recognised more housing was needed, especially in Auckland "and apartments are part of the answer".
National finance spokeswoman Amy Adams called the bill which set out to ban foreign buyers a dog and said it was a textbook example of bad law-making.
She also criticised Parker for proposing late changes to the bill which expanded the Overseas Investment Act regime to "profits a pendre" such as forestry and viticulture where investors can grow trees and vines and harvest them without owning the land.
Forestry will be subject to the regime for investments over 1000ha yet viticulture for anything over 5ha.
"The bill will hamper the ability of New Zealand businesses to access foreign capital in order to expand and impose significant costs and delays on the housing sector."
- Any person can buy residential property in New Zealand whether or not they live here.
- EXISTING HOUSES: Sales of existing houses limited to New Zealand citizens, Australians and people with a permanent resident visa who have lived in New Zealand for at least a year.
- NEW PROPERTIES: Overseas investors required consent from the Overseas Investment Office and only if they increased the number of dwellings on the land, did not live in them and they on-sold them after it was completed.
- HOTELS: Overseas investors needed approval by the Overseas Investment Office in order to buy any hotel unit if the land was categorised as residential or lifestyle.
PROPOSED CHANGES TO THE BILL
- EXISTING HOUSES: People allowed to buy existing houses will be expanded to include resident visa holders, such as people on a study visa or work visa, and Singaporeans but other overseas investors still banned.
- NEW PROPERTIES: Overseas investors will be allowed to buy new apartments off the plan in developments of more than 20 units - up to 60 per cent of units in such developments can be owned by overseas investors - but they are still not allowed to live in them. The apartments may be kept by overseas owners as a rental, sold under a rent to buy scheme or as part of a shared-equity development.
- HOTELS: Overseas investors will be allowed to own any number of units in a hotel with 20 or more units on condition they enter a lease-back arrangement with the hotel developer and not use the unit for their own use for more than 30 days a year.
-UTILITY COMPANIES: Business supplying or transmitting electricity, gas and telecommunications will not be required to get consent from the Overseas Investment Office to buy residential land if it is being used for the purpose of providing the relevant service.