The government says new builds will be exempt from planned changes to the tax treatment of residential investment property.
The changes will stop interest deductions being claimed for residential investment properties other than new builds, a move the government hopes will boost housing supply.
They are accepting consultation on the proposal as to how long the exemption should apply.
Revenue minister David Parker told RNZ the government was worried there was a housing bubble developing but after announcing new tax policies, there was an immediate effect.
"You could just see some of the pressures going out of the market, first home buyers getting a better chance of buying a home."
The government is considering whether the rule should apply only to the purchaser of the new home, or to the new home itself, Parker said.
"The proposal to exempt property development and new builds should help boost supply by channelling investment towards increasing housing stock and away from direct competition with first-home buyers and owner-occupiers for existing housing stock," he said.
"This consultation is focused on finalising the detailed design of the rules. The proposals will not affect the main home."
Finance Minister Grant Robertson said the government's goal was to encourage more sustainable house prices, by dampening investor demand for existing housing stock to improve affordability for first-home buyers.
"This is part of the government's move to cool the property market. A more sustainable housing market supports more first-home buyers to get into their own home but also protects our recovering economy. So we all benefit," Robertson said.
Consultation closes on 12 July 2021.