NSW Treasurer Mike Baird has defended a government scheme that gives non-Australian citizens $5000 new home grants, saying it is boosting housing construction and affordability.
But he says the government is open to making changes to the New Home Grant Scheme to help all first home buyers.
A wave of Chinese investors has been blamed for driving up Sydney house prices and keeping first home buyers out of the property market.
Mr Baird said on Tuesday the $5000 New Home Grant was introduced in 2012 when the NSW housing sector was close to an all-time low.
He said that as distinct from the government's $15,000 First Home Owner Grant, the sole purpose of the New Home Grant was to boost housing supply, putting downward pressure on prices and rents.
"We are conscious of the pressure on first home buyers that foreign investors could be applying," he said in a statement.
"Accordingly we are constantly looking at all options to ensure that our first home buyers are given every support to own their own home.
"Any policy action we take must not jeopardise the recovery in the housing sector that is currently underway."
Mr Baird said the availability of a new home incentive to foreign purchasers was nothing new, with NSW Labor's Home Builder Bonus, introduced in 2010, also available to foreign purchasers.
He said the First Home Owner Grant was available only to Australian residents and total support for first home buyers was up to about $35,000.