Key changes earmarked by the Government include an extension to the bright-line test to 10 years, the removal of the deductibility of interest from rental income, and plans to limit interest-only lending.

There are also changes to the Government's First Home Loan scheme, with grant caps lifted and property price caps also raised. 

The reforms are aimed at solving the housing crisis, but have been criticised as investor-bashing.

David Windler of The Mortgage Supply Company, said the increased caps for new builds eligible under the First Home Loan scheme could prompt developers to lift their prices.

"I don't think it's necessarily going to do anything for first home buyers at all," he said. 

Windler predicts the changes for investors, such as the removal of interest deductibility, will hit "mum and dad investors the hardest".

He said investors would have to "find extra funds",  amid the interest deductibility changes.

NZFSG's Bruce Patten said the extension of the bright-line test was "ridiculous", and "a capital gains tax by stealth". 

He said the interest deductibility changes, to be phased in over several years, would be "a nightmare" for investors and their tax accountants to navigate.

Patten said the increases in the First Home Loan grants and caps were "inadequate", given 20% rises in house prices over the past two years. 

Sarah Bloxham, of Lets Talk Mortgages, who specialises in loans for first home buyers, agreed that the raised caps for Auckland homes were not good enough.

"It's not enough for existing houses in Auckland. That’s just no jump at all – you cant buy a garage in Auckland really for $625k."

Bloxham fears the changes for investors could drive landlords out of the industry.

"I'm already hearing of so many investors not buying any more due to more deposit needed. This then will push rents up due to less stock, and then we’ll end up with overcrowding or more homeless or more people going into state housing," she added.