It wouldn't. I don't think you have the maturity or basic understanding of mortgages/loans and would strongly suggest not purchasing until you really understand.

Let's say you fool KiwiSaver and first home grant + the bank into letting you buy a house in Gore for $300k. You rent it out successfully hiding behind something and pretend you live there. Fast forward 24 months or whatever the rules are and KiwiSaver doesn't care anymore. You sell the house - make next to no money after real-estate fees + lawyers because it's only been two years - maybe you split even or pocket 20k.

You don't walk away with the sale price of the house. You still have a mortgage. You owe the bank. You don't now have 320k to use as a deposit on a house in Auckland, you have what's paid on your mortgage as a deposit.

You still will need to be approved for the house in Auckland. You will still need the same deposit you would have always needed.

Your friend seems to think you go to the bank with 100k (20%) and then the bank gives you 500k. Then you just buy and sell anything as you please.