The nation's tumbling property prices could shave up to 1.2 percentage points from economic growth in 2019 as the decline hits housing construction and consumer spending, AMP Capital Investors warned.

Sydney and Melbourne prices will drop a further 10 per cent next year, taking their peak-to-trough fall to 20 per cent as a "perfect storm" smacks housing, AMP Chief Economist Shane Oliver said in a research report.

The property downturn "will have a significant economic impact", AMP predicts. Credit:Rob Homer

He predicts the Reserve Bank will cut interest rates in the second half of 2019 and end the year with a cash rate at 1 per cent from the current record low of 1.5 per cent.

"The positive feedback loop of recent years of rising prices bringing higher demand and further price gains has given way to a negative feedback loop of falling prices leading to reduced demand and further declines," Oliver said of housing. "This could all be made worse if immigration levels are cut sharply."