Medium and high density developments are set to trump those in the urban fringe, RP Data has suggested.

The J.P. Morgan/Fujitsu Australian Mortgage Industry report has cited RP Data research director Tim Lawless, who stated that development trends point to increasing urban density rather than continuing urban sprawl.

"There is likely to be an ongoing trend towards inner city densification via development of medium and high density living options close to the city," Lawless said.

Lawless commented that inner city development reflected increasing consumer preference for urban lifestyle. He predicted that government development strategies would most likely prioritise in-fill development rather than greenfield construction.

"We are already seeing more segments of the housing market moving towards medium to high density living options due to more affordable price points, changing lifestyle preferences and ongoing inefficiencies related to commuting from poorly connected locations in the outer fringe of many capital cities," Lawless said.

While Lawless forecast that greenfield developments would remain in demand, he said the practical costs incurred in the developments could see state governments increasingly favour inner city projects.

"The costs associated with new transport linkages and infrastructure development provide a significant challenge to Government and developers," he commented.