House price declines of up to 20 per cent and an 80 per cent crash in residential sales is the doomsday scenario investment bank Citi says is a real possibility if the residential property market rolls over.

Key points: Prices in residential developments could fall 20 per cent if the property market cools

Prices in residential developments could fall 20 per cent if the property market cools Historically sales have fallen 70 per cent from peak-to-trough in downturns

Historically sales have fallen 70 per cent from peak-to-trough in downturns The property market generally takes two years to unravel

Citi's residential property team has looked at the impact of a cooling property market on big developers such as Stockland and Mirvac and the picture is far from pretty.

"When the market cools, it freezes — peak to trough volumes can decline as high as up to -80 per cent," Citi's David Lloyd said.

"One industry contact puts a 90 per cent probability on a 10-to-20 per cent decline in house prices in the next 12 to 24 months," Mr Lloyd and his team wrote in a note to investors.

"House prices tend to closely follow housing sales volumes, and housing sales volumes have already started falling.

"We believe a continuation of declining housing sales could put downward pressure on house prices, negatively impacting both Stockland and Mirvac."

Stockland sold 6,600 residential lots last year — up 8 per cent on 2015 — while Mirvac sold 3,300 in a record year.

Citi said opinions remained divided about which way the market is heading in the short term.

"The residential bulls are expecting robust land volumes to continue with upward pressure on prices, albeit at a slower pace than the past 12 months," Mr Lloyd said.

"The bears are pointing to declining auction clearance rates, declining investor activity, rising interest rates and apartment pre-sales in the $600,000 to $2 million [range] suffering from declining Chinese interest from tightening capital controls."

On Citi's analysis, projects located in metropolitan areas typically fare better than those in the regions, while large projects have a lower downside.

While the average peak to trough change in sales is about 70 per cent, it generally takes two years to unravel.