Local buyers and upgraders who scored massive gains from the sale of their homes are fuelling the demand for luxury properties with "prime views", market watchers said.

Properties overlooking scenic views like the Sydney Harbour or Perth's Swan River cost around $20,000 to $43,000 per square metre. Given the limited supply of such properties with "prime views", prices are expected to jump further.

"Interest from local buyers definitely outpaces that from foreign buyers. I'd suggest seven out 10 sales are to local buyers," Gavin Rubinstein, founder of Ray White TRG, told The Australian Financial Review.

Waterfront homes in Australia carry roughly a 40% premium, according to estimates by Knight Frank. In Sydney, homes with prime views even command a premium as high as 89%.

"There are only limited opportunities for vantage points dotted around Sydney Harbour, so these properties continue to remain tightly held," Deborah Cullen, head of prestige residential at Knight Frank Australia, told the AFR.

In fact, these properties sell fast even during a slump, with buyers willing to pay millions above the asking price just to get a slice of the luxury market.

Take the homes overlooking the Swan River in Perth as an example — this part of the market went against the downturn and continued to attract homebuyers, said Jody Fewster, director of Ray White Cottesloe and Mosman Park.

"I sold 25 Saunders Street in Mosman Park last April for $5.75m within four days of listing. The home was a 40-year-old home in original condition on a 1,062 square metre block, but it was all about the view. It commands a protected panoramic view across Mosman waters," she told the AFR.

However, not all waterfront homes are created equal. Ben Collier, director at The Agency, said it all boils down to the "prime view". He said a renovated non-waterfront home facing the Sydney Harbour Bridge would sell more than a similar house on the other side of Point Piper overlooking Rose Bay.

"The difference can be anywhere between $10m and $20m," he said.

Learn some short-term letting strategies to yield maximum profit by listening to YIP Talk’s fourth episode featuring Calum Walters of MadeComfy.