House prices will rise this year, with another 3% growth by 2020, according to Australia and New Zealand Banking Group (ANZ).

House prices will bottom in the next months but will modestly rise during the end of the year, and then continue to rise in 2020, according to the bank’s quarterly housing report.

Sydney prices are predicted to rise by 3%-4% over 2020, with Melbourne experiencing more than a 4% increase. While Darwin is the only capital city projected to witness a decline next year, the report said.

After two years of price declines—with values in Sydney and Melbourne falling by 15% and 11%, respectively, the market was stabilising, according to ANZ Senior Economist Felicity Emmett.

“Reduced access to finance has been weighing on the market, but regulatory easing and two interest rate cuts—and likely more to come—have combined to lift sentiment sharply,” Emmett said.

However, ANZ economists warned not to expect a “V-shaped recovery” in housing values.

“Our view for some time has been that the tightening in credit has been the major driver of weakness and while there has been some easing at the margin, changes to the use of Household Expenditure Measure and the introduction of comprehensive credit reporting will offset some of the impact(s),” Emmett said.

The decreasing number of properties for sales affected the shift in buyer dynamics, as demand starts to outweigh supply. However, the major bank warned that a “substantial amount of supply coming on stream”, especially in Sydney in spring, would likely dampen chances of a strong recovery.

Despite the low-interest-rate environment making mortgage repayments more affordable, household debt continued to leave consumers vulnerable, ANZ said.

“While helping to remove risk from new loans in the longer term, tighter lending standards may also temporarily increase arrears rates,” Emmett said.