WELLINGTON (Reuters) - New Zealand’s government on Tuesday softened its stance on foreign ownership of homes, rewriting a proposed law banning non-residents from investing in housing.

The amended law would allow non-residents to own up to 60 percent of large, new apartment buildings. There is currently no ban on foreign ownership of land, houses or apartments.

The amended bill will also exempt Singaporeans from the foreign ownership ban under a free trade agreement (FTA) between the two countries.

The law still needs Parliament’s approval to take force, but the changes underscore the government’s hope of attracting foreign investment in large residential developments to tackle a shortage of housing that has driven up prices and rents.

“This law will ensure that the market for our homes is a New Zealand market, not an international one,” Associate Finance Minister David Parker said in an emailed statement. “This will help first home buyers to get their foot on the property ladder.”

The Real Estate Institute of New Zealand (REINZ), which lobbied for the amendment, welcomed the changes but said it was still wholly opposed to the ban. “We don’t believe that the ban will resolve any housing affordability issues given the proportion of sales to overseas buyers is so low,” REINZ chief executive Bindi Norwell, Chief Executive said in a statement.

Foreign ownership has attracted criticism in recent years as New Zealand grapples with a housing crisis that has seen average prices in the main city of Auckland almost double in the past decade and rise more than 60 percent nationwide.

The country’s Labour-led coalition government, with popular 37-year-old Jacinda Ardern at the helm, successfully campaigned in the lead up to September’s election on a promise to clamp down on house price growth and reduce high rates of homelessness, in part by banning foreign buyers.

Official figures out this month showed that the overall level of foreign home buying was relatively low - at about 3 percent of property transfers nationwide but was highly concentrated in certain areas such as downtown Auckland and the southern scenic hotspot of Queenstown.

The majority of overseas buyers were from China and neighboring Australia, according to Statistics New Zealand.

The government has said the ban would not apply to Australians and has been negotiating with Singapore, whose FTA with New Zealand allows foreign ownership, on whether to grant an exemption.

This story, reported by Leika Kihara for Reuters, first appeared on June 19.