Treasurer Scott Morrison believes the slow release of land is behind soaring house prices.
Mr Morrison said it was important to have a competitive regulatory system on housing development, commending the NSW government on its decision to release almost 8000 hectares of land for a new southwestern Sydney community.
"If we have the pent-up supply issues and not being able to respond... then night follows day and prices go up," he told reporters on the NSW Central Coast on Friday.
However, Treasury officials told a parliamentary committee the government was also looking at tax treatment of capital gains on investment properties.
People who own investment properties only pay half the normal amount of capital gains tax and can negatively gear, or count as tax deductions, money spent on maintenance.
Senior Treasury official Paul Tilley told the House of Representatives inquiry into home ownership on Friday that negative gearing did not cause a tax distortion.
But the department had spent a lot of time looking at the capital gains exemptions, and continued to do so, he said.
"The new prime minister and new treasurer have indicated they're areas, together with superannuation, that we'll look at," Mr Tilley said.
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