QBE’s annual housing outlook paints a mixed picture, as Sydney and Melbourne see a correction but other parts of the country head into strong growth.

The report says over the next three years house prices are set to rise in Adelaide by 12.4%, Brisbane by 11.3%, Canberra by 10.4%, Hobart by 7.9%, Darwin by 6% and Perth 5%.

However, it’s a different story in the previously overheated markets of Sydney and Melbourne.

In Sydney, prices rose a staggering 84% between 2012 and last year, before falling 7.6% this year. They are expected to fall a further 3.5% next year, before bottoming out in 2020 and rising by 2.3% in 2021.

Melbourne prices increased 69% from 2012 to last year, before falling 1.6% this year. They are expected to fall a further 4.2% next year, before rising by 0.6% in 2020 and strengthening by a further 1.2% in 2021.

But what does all this mean for the insurer’s Lenders’ Mortgage Insurance (LMI) business?

According to QBE LMI CEO Phil White, the crucial factor is not the pricing changes but a significant increase in first-home buyers.

He told insuranceNEWS.com.au today there is a direct correlation between first-home buyers and investors – as investors go out, the same number of first-home buyers come in.

And as investors make up just 20% of QBE LMI’s business, any increase in first-time buyers is good news.

“First-home buyers have been surging back into the market, with lending to them at their highest level since 2010,” the report says. “This is expected to continue for the next 12 months at least.

“Tighter lending standards for domestic investors and restrictions on international buyers are believed to be the primary drivers.”

Last year, lending to first-time buyers grew 74% in Sydney and almost 30% across the rest of the country.

Mr White says the whole premise of LMI since its inception in 1965 has been to help Australians achieve the dream of home ownership.

He says more than half of first-home buyers do not have a substantial deposit and therefore rely on LMI.

“For us, there is a great opportunity to help first-home buyers over the next 12 months, and fulfil our core purpose.”

The trend for LMI over the last few years has been downwards, as major lenders have reduced volume. QBE LMI wrote about $480 million in premium in 2014 but this was down to $287 million last year.

However, Mr White is comfortable with the fluctuation.

“We’ve been here for 50 years, and lulls and growth are in the nature of the housing market,” he said.

To see the full report, click here.