Budget amendments are likely to cut off up to 4% property values, according to some specialists, but they might not convert into price drops in the soft property market.

Westpac economists said that the reforms were a "clear negative" for house price expansion, and expected values to plummet about 4% over the next two years, though real prices would most likely just remain even for longer.

Westpac Economist, Dominick Stephens said that people underrated the consequences of what was basically a tax protection on capital gains, but this would take some time for realization.

He said that they believe that it will take many years for the change in income tax to finally gush through to house prices.

He added that Treasury's guess that house prices would drop by 2% was "overly optimistic".

The Real Estate Institute does not anticipate considerable leaps in costs or rents, saying that tax gains are just one segment of the investment equation.

BNZ Economist, Tony Alexander estimated that house prices would come under meek demands before recommencing a sluggish mount next year owing to a scarcity of housing.

He said, "As we have long noted we are not building enough houses in New Zealand and investors will now build even fewer. We expect this growing imbalance between demand and supply to restrict price declines ... and lead to mild rises again over 2011".