Australian house prices are set to rise in 2013 as increased affordability and interest rate cuts entice buyers into the market.

The latest snapshot of the national property sector shows prices dipped in the three months to the end of September, but they were unchanged over the year.

The Bendigo Bank/Real Estate Institute of Australia real estate market report found the weighted average median house price for capital cities fell 0.6 per cent in the September quarter, compared to the June quarter.

However the average price for other dwellings, including apartments, rose 1.2 per cent.

While Sydney remained top of the list for the most expensive median house properties, prices fell 0.4 per cent to $641,890 from the previous quarter.

Darwin was the next expensive city at $568,300, followed by Melbourne at $530,000.

The cheapest median capital city price was in Hobart at $340,000.

REIA president Peter Bushby said prices were expected to improve in 2013.

“We expect to see increased growth in the market based on improving affordability, coupled with recent interest rate reductions,” he said.

“The rate cuts were a step in the right direction, and should encourage investors to start looking at investment properties.”

A strong demand for rental properties would be encouraging for would-be investors, while buying a home would also become more attractive thanks to increased affordability, Mr Bushby said.

The Reserve Bank of Australia cut the cash rate by 0.25 per cent to three per cent at its December 4 meeting, following earlier cuts in May, June and October.

Australian Property Monitors agreed that next year should be a good one for the market, with median house prices expected to rise by three to five per cent.

APM’s State of the Market report, also released on Wednesday, forecast median house prices were set to rise by three to five per cent in 2013.

Perth and Darwin would experience the largest growth, of between five and seven per cent respectively, while prices in Hobart and Adelaide would be flat.

“Overall markets have stepped forward modestly into recovery in 2012 with the prospect of this trend continuing in most capital cities,” APM senior economist Andrew Wilson said.

“2013 should continue to build on the modest gains of the past year, however the forthcoming federal election and the likelihood of a protracted campaign may result in some uncertainty amongst homebuyers and sellers, with confidence already low.”