If you are poised to invest over the next few years, Brisbane could be your best bet for strong growth.

Queensland’s capital city is set to be a shining star with a forecast of 17% growth in the median house price over the next three years, according to the BIS Shrapnel Residential Property Prospects 2014 to 2017 report.

The report, which was released today, predicts that the Brisbane market will have the strongest price growth of all the capital cities because of significant improvements in affordability and an undersupply of dwelling stock.

It also states that, of the other capital city markets, only Sydney’s market is likely to continue to show strong growth (of about 10% over the next two years) – although it does forecast a fall-off in growth by 2016/17.

Price growth in Melbourne, Perth and Darwin is expected to start slowing in the near future, while the markets in South Australia, Tasmania and Australian Capital Territory are expected to remain relatively flat.

BIS Shrapnel senior manager Angie Zigomanis said that, while low interest rates would continue to underpin residential markets for the time being, rising dwelling supplies and tightening interest rates would bring about a downturn.

While the economic transition from resource investment to domestic business and residential investment would be slow, it would eventually happen, he said.

This would have a positive effect on the economy and employment later in 2015, which would support house prices, but would also signal the beginning of a tightening in interest rate policy.

Rate rises would be sufficient to strain affordability, particularly in Sydney and Melbourne where recent price growth has been strong, and the impact of higher rates would be compounded by rising dwelling supply, Zigomanis said.

“As a result, BIS Shrapnel expects all markets to weaken by 2016/17 with the level of weakness depending on any dwelling deficiency still remaining and how far affordability is strained as interest rates peak.”

Besides Brisbane and Sydney, the report forecasts good growth for Newcastle (15%), Wollongong (14%), the Gold Coast (13%) and the Sunshine Coast (13%) over the next three years.