There's no need to introduce a land tax for foreign buyers based on current sales data, the Housing Minister says.
Figures released yesterday showed only 3 percent of homes were sold to overseas-registered buyers in the six months between October and March.
Officials have stressed the new figures do not accurately reflect foreign property ownership in New Zealand.
They said the questionnaire may have confused some, but it would address that in its in next survey.
Opposition parties said the numbers were confusing, as another way of looking at them suggested more than a third of properties sold went to foreigners who had registered as living in New Zealand and paid tax overseas.
Housing Minister Nick Smith conceded there were some deficiencies in the data, but overall he said the figures showed claims that foreigners were fuelling the overheated market were "simply a diversion".
"Every time New Zealand has a political debate on unemployment, on crime or housing the easiest trick in the book is to create a scapegoat that it's these foreigners that are the problem," he told Morning Report.
A land tax was now off the table for now, he said.
"There isn't any data here that supports it... if we see a radical change then we are a government that's pragmatic that will respond, but there will be no basis for a land tax on the basis of the data that came out yesterday," he added.
The Property Investors' Association agreed that was the best course of action.
It's executive director Andrew King told Morning Report he supported a land tax on foreign buyers but only if it was proven they were fuelling the overheated market.
He said the figures released yesterday may not be entirely accurate and could grow over time.
"Its not the huge problem that I think we thought it was. Given that, I think the government is quite correct in not looking to introduce a land tax against foreign buyers," he said.
Labour Party housing spokesperson Phil Twyford said the data was a joke because it excluded trusts, businesses and people on work or student visas who bought property.
He said this underlined the need for a transparent and searchable database on property ownership similar to in Britain and Australia.