Capital gains tax won't move money from housing, claims BNZ economist

"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."