House prices are set for a 7.5 per cent decline from March next year, with the resulting slowdown hitting the broader economy and risking a recession, economists have warned.

Several leading investment banks have tipped that Australia's housing market, which has been a driver of economic activity as mining has slowed, is close to peaking as household budgets are stretched and supply begins to outstrip demand.

Although softening prices would make the market more accessible to aspiring home owners, they could trap highly leveraged buyers and push up unemployment as the sector cooled.

Macquarie forecast in a research note on Monday that the nation was looking at a 7.5 per cent reduction from "peak to trough".