Investors rushed in ahead of the Reserve Bank's clampdown on lending in a bid to beat higher deposit requirements, new data shows.
Mortgaged investors bought 30 per cent of all properties sold in January - the highest month on record and up from a 28 per cent market share in November, according to CoreLogic.
On top of that investors who were cash buyers were involved in a further 11 per cent of property sales.
Kelvin Davidson, senior economist at CoreLogic said some of the purchases made by mortgaged investors were likely to have been brought forward to ensure they avoided the 30 per cent deposit requirement.
The Reserve Bank announced it would undertake consultation on bringing back a 70 per cent loan to value ratio cap for bank lending to investors on December 8.
Last Tuesday it confirmed the LVRs on banks would come back in from March 1 with a further increase to 40 per cent from May 1.
Davidson said the January figures added weight to the Reserve Bank's decision to move back to a 40 per cent deposit for investors sooner rather than later.
The percentage of property purchases that went to mortgaged investors was higher in Auckland at 32 per cent and even higher in Rotorua at 39 per cent.
At the same time first home buyer activity fell as a percentage dropping to 22 per cent across New Zealand and 23 per cent in Auckland and Rotorua.
Davidson said there were signs of fatigue among first home buyers who were needing ever larger deposits to keep up with the fast-rising house prices.
"Even though they are able to tap their expanding KiwiSaver funds, the signs that first home buyers might finally be starting to struggle harder with ever-rising property values and hence deposit requirements are becoming clearer too.
"First home buyers' market share dipped reasonably sharply in January, to levels not seen for about three years."
Davidson said it was also interesting to note that the continued rise in investors activity was coming from the smaller end of the spectrum - those that have just bought their first rental property or up to their third.
"We suspect that these 'Mum and Dad' investors are more likely to have been the people most affected by the sharp falls in term deposit rates, or in other words the ones who have had the most incentive to 'search for yield' somewhere else. They could also be using equity from their own property to get a rental."
Davidson said with the investor deposit requirements now tightening it seemed likely that mortgaged investors' market share would drop and free up some opportunities for first home buyers.
"The growth in property values is also likely to slow (also simply because of the wider affordability pressures in the market), but outright falls still seem off the cards for now."