But how do you enforce it?
That said, occupancy requirements are reasonably common elsewhere (e.g. to claim first home buyer benefits in AU, to prove that it's your primary residence to avoid capital gains taxes in AU, to get owner/occupier interest rates in AU) so I assume that they have some means of enforcement, but haven't really looked.
Tying it to appreciation and paper profits could quickly drive someone out of their home (e.g. Seniors). Heck, this is why prop 13 was initiated in the first place, for all the damage it did.
So we end up with this bizarre situation where people in multimillion dollar houses can and do claim the aged pension.
See the other comment re: multi millionaires collecting the pension; my taxes paying for benefits with far more wealth than I'll ever have, it's a frustrating situation.
Agreed that foreign speculation is at most only part of the problem and that the drivers you mention are a large part of it, but you missed out the other significant factor in the "cultural" inclination to invest in property, which is that the favourable taxation policies (CGT discount, negative gearing, family home CGT exemption) and benefit policies (family home exemption from pension means tests) drive money into property.
In NZ's case it's even worse as there's close to no capital gains tax on any property speculation (no requirement to actually live in a property to claim it as an owner/occupier style non-investment property).