BNZ economist Tony Alexander has rejected the argument that a capital gains tax would result in additional money being invested in productive assets.
"Most of the money used to purchase investment properties is borrowed. That means the absence of buying a house does not free up something like the average house price of $350,000 for investment elsewhere," he said in his Weekly Overview.
"The amount may only be $50,000. Plus, this money can in fact only be "freed up" and made available for other investment in the case of a house which was going to be built not being built. If the freeing up simply involves an investor selling then of course someone else is buying so all that happens is debt shifts from one owner to another."
Alexander did say that reducing the incentive to acquire rental property would mean less borrowing, meaning lower interest rates than would otherwise be the case resulting in a lower barrier to productive investment being undertaken, though even this wasn't clear cut.
"The problem there though is that although in theory this link sounds good, in practice the level of interest rates is rarely found to be a substantial determinant of business capital spending levels. It is confidence in the future which matters more."
He also argues that the introduction of a capital gains tax wouldn't result in improved housing affordability, as other stronger policies such as reducing the ability of local authorities to charge developers levies would also need to be in place.
The bank has also released its latest BNZ-REINZ Market Survey.
The survey was unable to discern any visible trend on whether investors were becoming more or less active in the market.
"For three months in a row now the number of agents feeling more investors are entering the market has roughly matched the number feeling that there are fewer investors."
The survey found a net 1% of agents felt there were fewer investors in the market, a figure that was in stark contrast to the net 30% that feel there are more first home buyers in the market.
"This is the fourth month in a row during which this result has been positive and the latest result is reasonably well above June's net 19% of agents feeling more first home buyers are around."
In summation the report said the survey results point to evidence in most of the country of more buyers in the residential market, though they tend to be first home buyers rather than investors.
"In most of the large centres prices are perceived to be rising and in those centres buyers are more likely to capitulate to transact than sellers. But there remain some notable areas of weakness outside the main centres."