In Greek mythology the Hydra was a deadly water serpent with multiple heads. For each head that was cut off, two others sprang out to replace it. Fearsome stuff, and an entirely apt metaphor for the rumour and myth that surround New Zealand’s property market.

Recently, it was the turn of the demand head to re-emerge. The New Zealand Initiative took a good hack at this head last year with our three-part research project into how the housing market has become increasingly unaffordable over the past 40 years.

The reports sought to show the root cause of the problem was an unscripted collusion of household formation, the reluctance of local councils to release land, and the difficulty in getting permission to build at scale due to onerous planning rules.

Yes, easy credit terms were a tail-wind but that is abating as the Reserve Bank’s loan-to-value lending restrictions and tightening interest rate cycle bite. The ultimate problem still remains one of supply, as acknowledged last year by both Finance Minister Bill English and Labour Housing spokesman Phil Twyford.

Less explicitly, our reports also sought to tackle the perception that unrealistic demand is the real problem and dispel the hyperbole surrounding the quarter-acre dream, buy-to-rent investors, and foreign buyers snatching houses from under the feet of deserving New Zealanders.

What a pernicious beast that has turned out to be.

Only three months into an election year and already some political parties are promising to impose a capital gains tax and ban non-resident foreigners from buying houses. That is made worse by ill-informed media commentators seizing on the topic.

Yet it is hard to support this position when looking at the facts. New Zealand will build 198,000 houses in the 10 years to 2021 (excluding replacement of existing stock), according to official estimates. But that will still be 25,000 short of what is needed to keep pace with household growth.

This growth is driven by real factors such as a growing population, increased migration flows and a trend towards smaller household sizes due to an ageing population and shifts in culture. If foreign buyers play a role in hiking prices, it is at the margin.

The fear of a foreign takeover is based mainly on anecdotal evidence. But is it grounded in fact?

Previously the Initiative has used cash sales as a proxy to gauge foreign activity in the housing market – an admittedly crude tool. New Zealand residents might equally pay cash for a house and foreign nationals choose to finance a property locally because of historically low interest rates.

BNZ and the Real Estate Institute make a good stab at gathering more detailed information on the activity of foreigners in their most recent property market report. The survey, which compared results with a similar questionnaire from May last year, found 6.4 per cent of all sales in the month were made to people offshore, broadly in line with levels of activity seen nine months ago. This is a weak base on which to get an overall view picture of foreign ownership.

What the survey did show was that Chinese buyers accounted for about a quarter of the offshore sales in March, up from 15 per cent a year ago, perhaps explaining the xenophobic tone of the property market rabble-rousing of late. After all, it is much easier to spot an Asian buyer than a European one at a casual glance.

However, the survey also showed 41 per cent of those Chinese who bought property in March were likely to move to New Zealand to live. So it appears that less than one per cent of house sales in March were made to Chinese property speculators.

Like Hercules, who slayed the Hydra to complete his second feat, what we need is a flaming brand to cauterise the wound after the head has been lopped off and an excellent place to start would be more hard data.

It would be a fairly easy task to order the collection of this data but a cynic might observe that no political organisation would willingly deprive itself of such a useful tool to drum up headlines, particularly when in opposition. (This correspondent lives in hope.)

Ah well, such is the nature of hydras, particularly in the property market. We will just have to keep chopping at the head until that time. And by the way, if rising houses prices are what you are concerned about, here is a simple suggestion: building more homes might help.