The Prime Minister is in "deep denial" over the Auckland housing crisis and his latest comments have been described as "bizarre" by Labour.

John Key said Monday the hot Auckland housing market is not over-valued, sparking Labour to say Mr Key needs to be less "relaxed" about the crisis.

"I mean one of the reasons why there probably hasn't been a significant correction is because over the last 45 years there's a general view that housing prices are not over-valued relative to a whole lot of different factors," Mr Key told Radio New Zealand.

But Labour's housing spokesperson Phil Twyford says Mr Key is "in deep denial" about the crisis.

"John Key is deep in denial. He must be one of the only people left who are not concerned about the risk of the market going bust and causing immense human and economic damage," says Mr Twyford.

Mr Key believes the Auckland's "astronomical" house prices are simply the result of market forces, says Mr Twyford.

"He is applying the logic of currency trading to the Auckland housing crisis."

At the last election, Labour proposed a capital gains tax on on investment property, where if you buy an investment property at, for example, $500,000, sell it for $600,000, you'd pay say 15% or $15,000 in tax from the $100,000 profit.

The Government and the Reserve Bank disagree about the causes of the housing crisis with the Government consistently saying it's about supply.

And the Government has consistently rejected a captial gains tax, instead emphasising its work on boosting housing supply.

"The Prime Minister needs to realise Auckland house prices are not just numbers on a screen," says Mr Twyford.

"They are why a generation of young New Zealanders are shut out of home ownership, and why people are living in garages.

"When the Reserve Bank is insisting on new solutions to cracking down on speculators it is time the Prime Minister wasn't quite so relaxed about Auckland's housing crisis," he says.

Mr Key warned some landowners they are in danger of losing fast tracked consents to start work in special housing areas.

A special housing area is a zone set up to encourage the building of new homes - with fast tracked consents and less red tape than the regular consents process.