Home owners face a long period of "stagnation" in house prices next year as the housing market passes its peak, Barclays says.

The British bank's Sydney-based economist Keiran Davies has joined a chorus of investment banks in calling time on the nation's residential boom which has surged over the past three years on the back of the lowest mortgage rates since the 1950s.

Australia's housing market has peaked, the rate of the decelleration will determine its impact, Bank of America Merrill Lynch says. Credit:Michele Mossop

"We think activity will turn down later next year, with the significant over-valuation in house prices likely to be slowly eroded by a long period of broad stagnation in prices," Mr Davies wrote in a research note.

"We think the market is approaching a broad peak in terms of activity and that macro prudential polices are finally bringing domestic investor demand and house prices under control."