First-home buyers are now buying one in four homes around the country, but there are fears this could drop off as a result of the Government's backdown on the capital gains tax.
A Government Tax Working Group had earlier recommended investors be hit with a 33 per cent tax when they sold residential rental properties.
Landlords had decried the tax as an attack on the Kiwi way of life.
But some pundits, such as Westpac chief economist Domick Stephens, said the tax would have improved ownership rates and housing affordability by removing the "heavy skew" favouring property investors, whose profits are more lightly taxed than other types of investments.
However, the Government announced yesterday it would not be going ahead with the tax.
CoreLogic senior property economist Kelvin Davidson said while it had been hard to predict the exact effects of the tax, it was clearly a win for investors and a hit for first-home buyers.
"For investors on the margin who are considering investing in property, well clearly the gain you can keep when there is no tax is 30 per cent higher - it's a positive," he said.
"Having no tax will therefore bring a few more investors out of the woodwork to buy who would otherwise have stayed away, so for first-home buyers that is more competition."
The debate over a capital gains tax comes as home ownership rates are at their lowest levels in 60 years and many young Kiwis feel locked out of the housing market.
Despite this, however, first-home buyers have increasingly been working their way back into the market over the past year.
In Auckland, first-home buyers are now the largest buyer group, snapping up 27 per cent of all homes for sale during the first three months of this year, while investors have bought 24 per cent of properties.
Nationally, first-home buyers and investors are each buying 24 per cent of homes on sale.
Davidson said he did not want to overstate the impact a capital gains tax could have had on investors.
This was because the tax was not tipped to come in until 2020 and so the housing data hadn't yet showed evidence that investors' fear of the tax had been stopping them from buying.
Instead, the biggest change allowing first-home buyers back into the market came in 2016 when banks were forced to implement tougher rules for lending to investors to ensure they could afford to pay their home loans without going broke.
Investors had dominated the Auckland housing market up until the tougher lending rules were brought in, purchasing more than 30 per cent of all homes on sale.
After the rule changes, however, their share of new-home purchases dropped sharply to around 25 per cent.
The so-called "brightline test", in which investors pay a tax on profits from the sale of their property if they sell it within five years of buying, had also had an impact on the number of purchases they made, Davidson said.
However, investors had now adjusted to the new rules and were "hanging in there" despite many complaining that the costs of being a landlord had risen sharply, he said.
New Zealand top 10 first-home buyer hotspots
1. Papakura, Auckland, where first-home buyers snapped up 42.1 of all homes sold in first three months of this year
2. Porirua City with 38.3 per cent of homes going to first-home buyers
3. Hutt City, Lower Hutt, with 38.1 per cent of homes going to first-home buyers
4. Waitakere, Auckland, with 36.5 per cent of homes going to first-home buyers
5. Upper Hutt City with 34.4 per cent of homes going to first-home buyers
6. South Waikato District with 30.2 per cent of homes going to first-home buyers
7. Ashburton District with 29.9 per cent of homes going to first-home buyers
8. Manukau, Auckland with 29.5 per cent of homes going to first-home buyers
9. Dunedin City with 28.6 per cent of homes going to first-home buyers
10. Hamilton City with 28.6 per cent of homes going to first-home buyers