Research from BIS Shrapnel suggests house prices will rise by nearly 20 per cent in the next three years.
The rise would add more than $100,000 to the average house price.
According to an article in The Herald Sun, BIS Shrapnel found that house prices will rise by 3 per cent this financial year and 8 per cent in each of the following years.
The research, conducted on behalf of QBE Lenders' Mortgage Insurance, said the shortage of dwellings and soaring population were combining to create the perfect environment for property investors.
"Upgrader and investor demand is expected to gather momentum and take over as the main drivers of the housing cycle," QBE chief executive Ian Graham said.
According to Mr Graham, recent job security fears had held many potential buyers back from entering the property market.
Economic and employment growth is forecast to continue to slow until the middle of next year, when stronger growth is tipped to unleash a new batch of confident buyers.
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