Thousands of buyers could be caught out with apartment purchases they cannot complete over the next three years.

Martin Dunn, of specialist apartment sales agency City Sales, said banks had "pulled the plug" on the apartment market, with stricter lending criteria and more reluctance to lend on apartment purchases.

He said lawyers told him banks were going through contracts for off-the-plan apartment sales and pointing out details to allow them to get out of the deals.

City Sales had already dealt with a number of investors who borrowed deposits for new apartment buildings but then been turned down by the bank when they tried to get a mortgage to complete the purchase.

Many had bought apartments after going to property investment seminars, he said.

"They've got swept up ... There's a semblance of over-enthusiastic investment by unsophisticated people, a lot of them from out of Auckland. They are approaching banks saying, 'of course I'll need this mortgage come January or March next year' and the bank's saying 'don't talk to us, how are you going to afford that?"

About half the 4500 settlements due to happen over the next three years could be affected, he said.

Loan-to-value restrictions for investors had also made it harder for people to buy apartments as investment properties.

City Sales' data shows that the amount of new supply coming on to the market had dropped from 2700 new apartments in 2005 to 1493 this year – on track to drop to 449 new apartments in the market in 2021.

Dunn said there were a number of apartment building developments that had been advertised that would not go ahead.

Supply was driven by banks' willingness to lend to developers, he said.

The market would have to wait until the banks loosened their lending criteria again. It was "not a good look" for a city that needed more housing, he said.

"I'm seeing a two-year wobble in the market. We're going to have distressed brand-new owners," he said.

"There will be good buying for people – some people are going to be a little bit hurt over the next couple of years. We're dealing with a bit of it now but I think there's going to be a very large number."