Other suburbs along the Anzac Parade route would also attract buyers.

As part of discussions with Transport for NSW, Randwick Council is pushing for the extension to Maroubra Junction, which had a tram stop between 1921 and 1961.

The chief executive of developer lobby group Urban Taskforce, Chris Johnson, said the proposed light rail extension was how the city needed to grow.

“I think it's a very positive move," Mr Johnson said. "What Sydney needs is a series of arterial corridors extending from the CBD with increased densities along them.”

He said property prices would rise because buyers were prepared to pay more for better access to services and more public transport options.

Randwick and Maroubra are among the top suburbs for auction sales this year and such popularity would intensify as improvements such as the light rail were made to local infrastructure, said Andrew Wilson, senior economist for Australian Property Monitors.

“This will ensure that price pressures in these areas will be optimised relative to other Sydney suburbs," Dr Wilson said. Last year, Maroubra’s median house price jumped 15.7 per cent and apartments rose 5.7 per cent according to the Domain Property Guide. At present the median price for houses in Maroubra is $1.26 million, and for apartments it is $613,000, APM figures show.

"Over the property cycle this could add at least 1 per cent to long-term underlying annual prices growth."

Marcello Bo, sales manager at Ray White Projects, agreed that values would rise if the light rail extended to Maroubra.

“But I don't think it will be a significant rise because there will be a higher level of stock, so supply and demand will balance things out."

Mr Bo said developers were targeting sites along the proposed route that had been earmarked for higher density. The state government was trying to increase floor-space ratios along Anzac Parade in Kensington, Kingsford and Maroubra to take advantage of the light rail.

“The whole urban landscape will change with higher density development,” said Mr Bo, who believes Randwick Council's announcement is positive.

Veronica Perez, director of PRDnationwide-Perez Real Estate said people have been hearing about the possibility an extension of the proposed light rail to Maroubra before this announcement and it has been creating a hype among buyers and investors.

“While Kingsford and Kensington have the university and hospital, buyers are seeing the potential benefits of Maroubra having both the seaside destination and the light rail,” said Ms Perez. “It will definitely make a difference to interest in Maroubra. People will feel more connected to the city and university with the light rail in place."

CBRE managing director David Milton agreed. "It just changes peoples’ whole view of convenience to the city and work and even to the university and back. It gives people that extra level of convenience,” said Mr Milton. He said the light rail extension to Maroubra would bring more emphasis to the area which is already popular for developers but would benefit from the improved amenities, infrastructure and apartments that would come as a result of the light rail.

“There is typically a change of zoning with such infrastructure to make the most out of the area."

Mr Johnson said it would be "a win-win situation".

"The new urban corridor will attract more residents and better transport while keeping the current low-rise residential areas back from the light rail corridor,” he said.

Construction of the eastern suburbs light rail line is due to start later this year, subject to planning approval, and is expected to finish in about five years' time.