Liberal MP John Alexander has issued a stark warning about the current housing market, saying it is putting Australia at risk of becoming a nation of "imprisoned tenant serfs".

Mr Alexander made the startling comments to a House of Representatives inquiry into housing affordability established at the request of the Treasurer.

He said more housing supply would not help the situation, putting him out of step with Prime Minister Tony Abbott and Treasurer Joe Hockey.

The tennis great drew on a metaphor from his sporting days to illustrate how the benefits that negative gearing gives investors could nullify the benefits of more housing supply.

"If we increase supply, we are just playing the same game again between the same two competitors," he said.

"You might play Roger Federer once, you're not going to win, but you could play him a thousand times and you're not going to win."

Mr Alexander, the MP for John Howard's former seat of Bennelong in northern Sydney, said, if left unchecked, current policies could see a shrinking landed class rule over a growing group of tenants.

"It is a situation that's actually leading us to fewer people owning more properties where the landlord can drop the land off their title and just become lords," he said.

"And those who have failed to be successful in buying a home are imprisoned as tenant serfs, funding the gaining of greater and greater properties by the lords."

Parts of Sydney, Melbourne in a 'housing bubble'

Earlier this month, Treasury secretary John Fraser told Parliament Sydney and parts of Melbourne were "unequivocally" in a housing bubble.

On Friday, the House of Representatives Economics Committee inquiry into housing affordability quizzed other Treasury officials on whether the Department still held that view.

"Is it still the view of Treasury that it is a housing bubble?" asked the committee's deputy chairman and Labor MP Ed Husic. Jenny Wilkinson, acting deputy secretary of Treasury's macroeconomic group, replied: "I think if you read the Treasury Secretary's comments, there's different ways in which words are used in relation to this market. "The Secretary was clearly making the case that he was concerned about the rate of price increase in Sydney, in parts of Melbourne and in particular parts of Sydney, and the impact that this was having on the housing market, so we absolutely stand by those comments." Mr Husic asked again: "So, you do stand by the comments that there is a housing bubble in Sydney?" "I think I've said what I stand by," Ms Wilkinson replied.

Despite reiterating the concerns over recent steep price rises, particularly in the Sydney housing market, the Treasury officials appeared to be at pains to play down the risk the market is in a bubble.

Ms Wilkinson cited the continued high rate of home ownership in Australia, relative to other developed countries, and the broad stability of that rate, as evidence the nation's housing market is not in an unusual position relative to its history.

"Australia has relatively high home ownership rates compared with most other OECD [Organisation for Economic Cooperation and Development] countries, we are at broadly similar levels to countries like the UK, Belgium and Italy," she said.

"We've got significantly higher home ownership rates than countries like Germany and France and, on average, countries like the US."

Low vacancy rates but rental yields still falling

Ms Wilkinson also cited low vacancy rates for rental properties as evidence it was probably a shortage of homes in the face of a rapidly growing population that has caused the most recent price rises.

"Vacancy rates remain reasonably low by historic standards, so, again, this is just an indication that we've had a period in which supply hasn't kept up with demand and that there's significant scope to increase supply," she said.

However, the Treasury officials present struggled to explain why rents were growing so slowly, and why rental yields were falling if there was a shortage of homes.

Housing market analysts have pointed to ultra-low rental yields in Sydney and Melbourne as evidence investors are buying property on speculation of future capital gains rather than on the basis of the rental income they can collect.

An often cited reason why investors can afford to outbid owner-occupiers despite such low rental returns is negative gearing, which is the ability of investors to write-off rental losses against their total income from all sources.

Focus on negative gearing and capital gains tax

A separate Senate inquiry into housing affordability, reported in May, recommended the Treasury examine what effect investor tax deductions have on house prices and rents.

The Treasury's principal advisor, Greg Cox, said the Department was still waiting for the Federal Government's response to that inquiry, and needed the Treasurer's approval to proceed.

"Treasury hasn't done a specific piece of work on negative gearing and its impact on housing affordability ... and if we did that piece of work that would be obviously at the discretion of the Treasurer," Mr Cox explained to the committee.

Labor MPs requesting economic modelling on how the tax system affects property investment and real estate prices were a recurrent theme of Friday's Treasury testimony.

Labor MP Pat Conroy asked about whether the halving of capital gains tax may have boosted property prices and been a contributor to lower rental yields.

Another Labor MP, Dr Jim Chalmers, asked whether the Treasurer would have any information from his department to rely on when looking at what effect the tax system might have on prices.

"The Treasurer could always ask us to do a piece of work on that, but all I think Mr Cox is saying is that Treasury hasn't done any work on the impact of negative gearing on house prices," Ms Wilkinson responded.

Speaking to ABC News after the hearing finished, Mr Husic said the lack of a written Treasury submission put MPs "at a disadvantage in trying to get information".

When asked by the ABC whether the repeated questions around housing taxation issues were indicative of a serious intention to review capital gains tax discounts and negative gearing, Mr Husic repeated previous statements on the issue by Opposition treasury spokesman Chris Bowen.

"We are prepared to look at these things, with the caveats expressed that they don't impact on affordability, that they don't impact on investment decisions that are already made, well let's have a look," he said.