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Property experts say small investors will be hardest hit - and some forced to sell - by any changes to the way investment properties are taxed.
Renters could also feel the pinch, with Property Investors' Federation vice-president Andrew King predicting landlords could push up rents by 40 per cent over two years as they tried to rebalance the market and recoup costs.
The Government is considering axing the scheme where landlords and property investors claim losses against their taxes.
Around 400,000 houses and flats worth $140 billion are rented to 1.2 million tenants.
Mr King said property investors could be hit with $10,000 a year in costs on an Auckland rental.
"It can take five, six, seven years before rental properties start making money," he said.
Absorbing the losses would be out of reach for some small investors who would then be forced to sell, said Mr King. He said it might not only accelerate the slowdown of house prices but lead to a drop.
Scotney Williams, a residential property management consultant specialising in tenancy issues, said if introduced, new rules should not apply retrospectively, saving thousands of investors who might otherwise be caught out.
He said it sent a warning shot for future investors to be careful about the amount they borrowed.
Auckland Tenants' Protection Association's Angela Maynard said it was too soon to know what the effect on renters would be.
Policy analyst Greg Dwyer wrote to the Herald to say the plan would introduce discriminatory tax treatment for property investors, not bring an end to a "tax break".
"Landlords are broadly treated for income-tax purposes on the same basis as other investors," he said.
"The Government is examining a move away from the standard approach."
Mark Keating, a taxation expert at the University of Auckland business school, said some tax purists believed all investments should be treated the same but he supported the proposed tax changes.
He said a distortion was created because property investments had expenses - such as depreciation and repairs - that could not be claimed against other types of investments, such as shares.
