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At this rate, CoreLogic expects Melbourne home values to hit a new record as early as January next year.

Sydney house values have rebounded by 8.8 per cent and a smaller 6.8 per cent for units since bottoming out in May.

Mr Lawless expects Sydney home values to reach a new high by March next year, however worsening affordability, slowing population growth and higher stock levels could slow the current growth momentum.

“It’s hard to imagine such a rapid rebound in housing values being sustained far into 2020,” he said.

Nationally, home values are forecast to grow by up to 8 per cent over the next 12 months.

“We’re likely to see housing prices catch up and then overtake their previous record highs, however we expect the rapid rate of capital gains seen over the second half of 2019 to lose steam as stock levels rise and affordability deteriorates,” Mr Lawless said.

Some smaller capital cities could also see market conditions improve due to rising population fuelling housing demand and relatively healthy housing affordability.

“Considering that home values in some of the smaller capitals didn’t  fall anywhere near as much as Sydney or Melbourne, they’re poised to see healthy growth in 2020 and are also likely to reach new record highs through the first half of next year,” he said.

Investors set to return in 2020

After staying away from the market during 2019, investors are expected to return in droves, lured by the potential of bigger capital gains and cheaper financing.

“Investors are likely to be motivated by prospects for capital growth as well as the low cost of debt,” said Mr Lawless.

“While rental yields remain low, they are still higher than mortgage cost, providing abundant opportunities for positively geared properties as home loan rates move lower.”

Investors accounted for only 24.8 per cent of total lending during 2019 – the lowest level on record as uncertainties around negative gearing and tighter lending kept them at bay.

Premium suburbs dominate the 2019 top performers

The prestige suburbs in Sydney and Melbourne notched up the biggest gains in house values this year, although some desirable and affordable suburbs also made it to the list.

Beachside suburb St Kilda in Melbourne’s inner south topped the list of outperformers with 19.6 per cent growth, followed by Canberra suburb Melba with a 17.1 per cent increase.

In Sydney, Western Sydney suburb Carlingford staged the largest growth in house prices during the past months, racking up 15.4 per cent while Loftus in Sydney’s south gained 15.2 per cent.

In Brisbane, house prices for riverside suburb Hawthorne jumped by 6 per cent while mining town Moranbah surged 19 per cent.

In Hobart, house prices for outer suburb Bridgewater climbed by 9.5 per cent while Risdon Vale, surged by 10.9 per cent.

Risdon Vale also recorded the lowest median value within 10 kilometres of a capital city.