Australian house prices are set to rise as much as 20 per cent over the next three years, thanks to strong economic growth and an ongoing shortage of supply, according to a housing report commissioned by QBE.

The BIS Shrapnel Housing Outlook for 2010-13 shows the median house prices in Perth, Sydney and Adelaide are forecast to increase by about 20 per cent to June 2013.

"We think first home buyer demand will actually start to recover, as will investor demand," BIS Shrapnel managing director Rob Mellor said at the report's release in Sydney on Tuesday.

By the June quarter of 2013, Sydney's median price is expected to reach $750,000, up from $624,000 in the same quarter this year, followed by Darwin ($620,000) and Melbourne ($610,000).

Mr Mellor said six rate hikes in seven months by the Reserve Bank of Australia in late 2009 and early 2010 has more to do with the recent slowdown than anything else. RP Data-Rismark reported in early October that Australian capital city house prices dipped 0.2 per cent in August from July.

Mr Mellor also said a slowdown in China's appetite for Australian commodities could lead to a softening of house prices at some stage over the next three to 10 years.

The housing report comes at a crucial time in sentiment surrounding the Australian housing market. Recent figures were indicative of a slowdown in market prices, while international investors and even the International Monetary Fund have argued the local housing market is overvalued.