Building costs have increased 41% in New Zealand since 2019 in part due to the increase in the cost of materials.
House building was also curtailed by a shortage of plasterboard in 2022 when Fletcher Building, which produces more than 90% of plasterboard used domestically, could not keep up with demand.
"We expect a lot more competition on a range of products," Luxon said at a news conference.
The government said it would recognise building products from trusted overseas jurisdictions, allow authorities who certify new builds to accept the use of products that meet with specific overseas standards and approve building products certified through reputable foreign schemes.
New Zealand Building Industry Federation chief executive Julien Leys welcomed the change but said the execution of how overseas accreditation industries were recognised would be critical.
"We will eventually have much more product available to homeowners and builders in New Zealand, but it will take time before we see that translated through into lower costs," Leys said.
Fletcher Building declined to comment.
(Reporting by Lucy Craymer; editing by Costas Pitas and Sam Holmes.)
