Australia's capital cities will enjoy double digit house price growth over the coming three years, a new report by lenders' mortgage insurance firm QBE LMI has claimed.

The company's Housing Outlook 2010-12 report highlights record-low interest rates as being a key factor both in alleviating mortgage pressure on households and in maintaining affordability. Other positive cited include healthy rental returns, housing shortages and price reductions in top-end properties giving home owners the opportunity to trade up.

CEO of QBE LMI Ian Graham said that the outlook for the housing market is also positive for those who have recently entered the market, particularly first home buyers. He continued, "Double digit house price growth is forecast across all capital cities from June 2009 to June 2012, particularly in those markets with positive affordability."

Graham downplayed the significance of the recent rise in interest rates adding, "Despite a 0.25% rate rise in the first week of October, housing interest rates are expected to remain at a stimulatory level for some time, with the low interest rate environment remaining supportive of the first home buyer."

The report predicts that Adelaide will see property price increases of 23%, Sydney 21%, Melbourne 19%, Brisbane 15% while Perth trails with 12%.

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