Property prices in Sydney and Melbourne are on course to fall 20% and the risk of crash “cannot be ignored”, according to a significant rethink on the direction of the market by one of Australia’s most high-profile economists.

Shane Oliver, chief economist at AMP Capital, had expected the peak to trough fall in the two biggest cities to be 15%.

But a cocktail of factors including poor affordability, reduced credit, a tougher refinancing environment for existing borrowers and a fall in foreign buyers has forced him to revise his forecast downwards.

“Starting about a year ago it seems the tide has turned against property prices,” Oliver wrote on the AMP website on Thursday.

“Property prices in Sydney and Melbourne are likely to see top to bottom falls of around 20% as credit conditions tighten, supply rises and a negative feedback loop from falling prices risks developing.”

The warning comes against a backdrop of an increasingly gloomy outlook for house prices, which have now fallen in the big two cities for 12 months in a row. They have slipped almost 5% in the past year, implying they could now have another 15% to go.

Economists lining up to call it. 20% is a crash right? @ShaneOliverAMP https://t.co/QvPusN7ILl — AusHousingCrasⒽ (@aushousingcrash) October 18, 2018

Last week an NAB survey of property professionals showed that confidence in the market was “collapsing”.

Other factors identified by Oliver include a rise in the supply of units for sale and the negative feedback loop caused by falling price growth expectations as the fear of missing out factor turns into a phenomenon of investors fearing they will not be able to sell their properties and therefore accepting lower prices.

After prices peaked more than a year ago, Oliver had been predicting an annual fall of 5% in Sydney and Melbourne before bottoming out in 2020. His forecasts of a softer landing were in contrast to some more radical predictions of a 40% slump.

But, in a significant revision, he now sees falls of more like 7% and cites the reduction in the auction clearance rate to almost 40% in recent weeks as evidence of a sea change.

He stopped short of calling it a crash, arguing that prices will perform better in Adelaide, Brisbane, Canberra and Hobart along with regional centres because they have not experienced the boom in prices seen in Sydney and Melbourne.

But he warns that the risk of a crash “cannot be ignored given the danger that banks may overreact and become too tight and that investors decide to exit in the face of falling returns, low yields and possible changes to negative gearing and capital gains tax”.