House prices in major Australian cities are forecast to grow by about 20 per cent between now and 2012, according to a report from mortgage insurer QBE LENDERS' MORTGAGE INSURANCE (QBE LMI). QBE LMI's Housing Outlook report for 2010 to 2012, researched by BIS SHRAPNEL, confirms that recent low interest rates had helped to alleviate mortgage pressures on households, while bringing housing affordability back to its most attractive level for almost a decade.

QBE LMI chief executive Ian Graham said low interest rates, solid growth in rents and housing shortages would create favourable conditions for a strong recovery in residential property prices through to 2012.

* "Double digit house price growth is forecast across all capital cities from June 2009 to June 2012," Mr Graham said.