Finance Minister Grant Robertson has asked Treasury to review the effectiveness of the current five year test. Recent Inland Revenue figures suggest that a quarter of investors subject to the bright-line test did not pay the tax that applied.

With talk of the bright-line test being extended beyond five years, advisers fear the potential changes will harm the property market.

Glen McLeod of Edge Mortgages said: "Just like when it was adjusted to five years serious investors will take it in their stride. It is capital gains tax covered up," he added.

McLeod said an extension of the test would be a broken election promise, and said the move would not solve NZ's chronic undersupply problem.

Richard Brown of FCH Ltd said the move would be foolish.

"The ones who make the most noise, the Greens, some Labour supporters and the irrational envy crowd, fail to understand that any costs that befall investors, owners, businesses, all get passed on – usually to those who can’t afford to pay them, and then end up worse off.

"Any taxation, and incurred costs, etc will be passed on in higher property sale prices, higher rents, higher rates."

Matthew Dawe, a broker at MatthewDawe.com, said the extension would "discourage people from selling, and also discourage new supply by taxing investment – decreasing supply, pushing up prices further".

He added: "Sydney has capital gains tax, stamp duty, land tax, estate tax and a top personal tax rate of 45%. A 1/24th share of 1,000m² land, 65m² two-bedroom apartment 8kms from the city centre is AU$800,000. Taxes make it worse by discouraging investment, we need more homes not less. This is why house prices always go up more under Labour-led governments throughout NZ history, we need a massive increase in supply, anything else is a waste of time."