The recent employment boom in Canberra has led to a rapidly expanding population and critically low levels of housing supply all year. However, there are signs that vendors are returning to the market.

 "The Canberra auction market is stronger than it's been all year," Australian Property Monitors economist Matthew Bell told Your Mortgage. Canberra recently had its biggest auction weekend since July 2008.

"This indicates that the supply of existing properties is starting to increase to cater for the increased demand," Bell said. "Strongly rising prices certainly encourages more current owners to consider putting their property on the market."

Canberra house prices rose by 2.25% in the June quarter, and APM research showed that prices had also moved strongly in July and August, driven by sales in the $500,000+ market.

"Affordability is still better than it was a year ago," said Bell. "We expect prices to continue to rise for the remainder of 2009, and well into 2010." Other factors contributing to Canberra's strength were low interest rates, low vacancy rates and the return of investors to the market.