A report by a property think tank argues houses prices in Melbourne are being kept high by tens of thousands of homes that appear to be unoccupied.

Prosper Australia says its findings challenge the common belief that a shortage of homes is helping to drive the surge in rents and property prices.

Recent official and private data has shown a near 8 per cent jump in capital city home prices over the past year.

The majority of analysts attribute these gains to record-low interest rates and tight supply in some of Australia's largest cities.

But the Prosper Australia report argues that supply is tight not because there are not enough homes, but because too many are left vacant.

Prosper researcher Philip Soos says just under 1 per cent of dwellings in Melbourne were vacant and about 4 per cent were potentially vacant.

His figures are based on how many properties used no, or very little, water last year.

"For residential properties we found that about 12,500 properties did not use any water whatsoever over 2012," he said.

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"And about 64,000 use less than 50 litres of water a day."

Given that average daily water use per person is 161 litres, Prosper says those properties using less than 50 litres a day were probably vacant.

Property analyst questions Prosper figures

The researchers say the figures only include properties that have current accounts with the water companies and so exclude derelict properties and homes that have been empty for many years.

But Louis Christopher, managing director of property analysts SQM Research, says there are some other issues with the data.

"I think there's something in it but I just caution regarding those properties that perhaps they are unoccupied, but they're still not available for rent," she said.

"Let's consider for example a holiday home. A holiday home may be completely unoccupied for say, 11 out of 12 months in a year.

"It would come up in their measurement, but sadly this property is still not available for rent.

"And I think Prosper's point in all this is that they would like to see some change in the taxation laws where these type of unoccupied properties are almost forcibly put on the market, available for rent, with a view that would then put some downward pressure on rent."

Mr Christopher says the number of properties empty and available for rent in Melbourne is much lower.

"As a comparison, we also cover rental vacancy rates in Melbourne and we currently have a vacancy rate of 2.7 per cent," he said.

Philip Soos admits there are factors that may skew his figures up or down.

"There may be vacant properties that have sprung water leaks, which would then push the rate above our threshold and they're not included," he said.

"On the other hand factors that can bias the readings upward, such as fly-in, fly-out residents, or people who are away for long periods, out of state or overseas.

"There could be properties that are sitting vacant because council approval for renovations or building a new property make take perhaps months or even over a year.

"But outside of an extensive government survey, we simply have to make an estimate."

Land tax hikes could create rent incentive

Mr Soos says many owners are holding onto empty properties because the net return from rent is so low as to make it not worth the time and effort, while the real profit is to be made from rising property values.

He says an increased land tax would discourage investors from holding empty properties.

"An increase in the land tax has the effect of reducing rental income and stunting out capital growth in the value of the land under these properties," he said.

"And if this is the case then it also acts as a withholding cost which provides an incentive for a landlord to actually tenant the property in order to gain an income to pay down the increased land tax."