Banks may soon be able to offer more home loans to investors in a move that could push national house prices back into strong growth.
Investors had earlier been buying fewer properties after tough new rules introduced in 2016 made it harder for banks to lend to them.
• Property investor survey suggests they're mostly conservative
• Premium - City of Sales: Inside look at Auckland's property investors
• How much tax do property investors really pay?
• Property investors 'exploiting' vulnerable with garage renovation 'trick'
Yet, in the past three months, the tide has begun to turn.
Investors have been drawn back to Auckland by falling prices, the scrapping of a proposed capital gains tax and healthy returns from rentals compared to low interest bank deposits, CoreLogic senior property economist Kelvin Davidson said.
Predictions the Reserve Bank may further cut the official cash rate and loosen its home loan lending restrictions in November loom as further boosts for investors.
"It adds up to a key theme being the shift from 2018-19 being the years of the first home buyer to 2020 potentially being the year of the investor," Davidson said.
His comments come after investors had enjoyed a golden period buying and selling properties during Auckland's near decade of booming house price growth from 2008 to 2016.
Yet, while many investors profited, the skyrocketing house prices in turn locked other aspiring buyers out of the market.
It also raised fears buyers were taking on so much debt that it presented a risk to the economy.
The Reserve Bank acted in 2013 to cool off the market by progressively introducing tougher lending rules, known as loan-to-value-ratios or LVRs.
These limited the number of home loans banks could offer to buyers who only had small amounts of money saved for deposits.
Investors were hit with tougher limits than owner occupiers. By 2016, banks were only allowed to give 5 per cent of their total home loans to investors who had deposits less than 40 per cent of the total loan.
Banks also began closely scrutinising buyers' finances to ensure they could pay off their home loans even if interest repayment rates climbed as high as 7 per cent.
Together with other Government measures targeting investors, these restrictions contributed to a fall in Auckland house prices and led the share of New Zealand houses bought by investors to drop from near 30 per cent to closer to 20 per cent.
But with Auckland house prices beginning to fall and price growth elsewhere around the country slowing, the tough measures have also begun to soften.
Investors now only have to save a 30 per cent deposit rather than a 40 per cent deposit.
There was also a "fair chance" the Reserve Bank would further soften the restrictions at its November 27 meeting by allowing banks to offer 10 per cent of their total home loans to investors with smaller deposits rather than just 5 per cent, Davidson said.
Westpac chief economist Dominick Stephens also forecast the Reserve Bank's "policy of loosening LVR restrictions" to continue.
These steps along with a continued shortage of housing, strong migration and employment figures had Stephens tipping national house prices to grow by as much as 7 per cent next year.
Signs of the re-emergence of investors could already been seen over the last three months, Davidson said.
Mortgaged investors - those taking out home loans - bought 25 per cent of all New Zealand homes sold in the last quarter. This was their largest market share since the tough lending restrictions were introduced in 2016.
In Auckland, mortgaged investors bought 28 per cent of all city homes sold, moving ahead of the 27 per cent secured by first home buyers.
Owen Vaughan, editor of property website OneRoof, hoped new investors potentially gaining access to home loans because of the predicted changes would invest wisely and not with mentality to flip.
"New investors who buy in maturer markets, such as Auckland and Tauranga, should not rely on the pace and level of capital gain seen during the boom years. Longer term plays are needed for these cities," he said.