The current market conditions set a positive tone for capital cities' housing scene this year, and several factors could further strengthen the upward pressure on prices, said an expert.

The latest market forecast by Domain points to gains across all capital cities over the next two years, with Sydney and Brisbane reporting the most robust growth. Melbourne is also projected to do well and is expected to hit the million-dollar median house price by 2021.

"Very low interest rates, and the expectation that interest rates will remain low, will be the key driver of rising property prices in 2020," said Trent Wiltshire, an economist at Domain.

The combined median house price across all capital cities is slated to grow by 8% this year and by up to 7% in 2021. For units, the rate at which prices are expected to grow is also strong at 6% this year and up to 5% in the next.

The table below shows the expected price growth in each capital city:

However, other upside risks could further boost the projected price gains, including a lacklustre growth in construction.

Wiltshire said while the construction activity is anticipated to start rising again in 2021, the response from the building industry might turn out to be slower than in the past.

"Developers may be more wary of the sustainability of the rebound, and they are also having more difficulty obtaining finance than in previous booms. If this occurs, then housing construction won't pick up substantially in 2021, meaning price growth may be faster than anticipated," Wiltshire said.

Another factor is the success of the First Home Loan Deposit Scheme. While the federal government has only released 10,000 slots for aspiring homebuyers so far, there are plans to expand the scheme and offer more.

If the demand from first-home buyers continues to strengthen, prices are naturally going to inflate, Wiltshire said.

Intense competition for houses amid the limited supply might also trigger the fear-of-missing-out (FOMO) trend.

"The rebound in 2019 was more rapid than expected, meaning momentum may push prices up faster in 2020 than we have predicted as the FOMO increases," Wiltshire said.

Recent figures from the Australian Bureau of Statistics show that owner-occupiers were the main drivers of the price upturn last year. In fact, owner-occupier home loan commitments have risen by 20%, faster than the 11% gains in the investor segment.

"Over the next one to two years, investors may return to the market at a faster rate, which could mean a longer period of rapidly rising price," Wiltshire said.