"There's a link between a change in new mortgages and change in the price level. So a fall in the level of new mortgages causes a fall in prices."

Housing credit has slowed in the wake of tighter lending conditions from APRA. There was a 0.47 per cent increase in October according to the latest Reserve Bank update, but over the past three months, housing credit grew at a 6.1 per cent annualised pace down from its peak of 6.8 per cent in March, Westpac added.

When Mr Keen famously called a housing crash incorrectly in 2010, he had assumed Australians would stop borrowing. But encouraged by the first home buyer's grant under the Rudd government and continued cash rate cuts, household debt continued to rise, pushing up house prices.

This time however, the Reserve Bank looked unlikely to cut rates despite having done that "within a few months in seven out of nine cycles" in the last three decades, each time house price growth over a 6-month period weakened, UBS said.

"Dwelling price growth just now dropped into the historical 'RBA rate cut' territory in November," UBS said in a note.

"However, there is now a risk of falling house prices ahead driven by the lagged impact of macroprudential tightening combined with booming residential approvals...Hence, under this scenario, the RBA would likely stay on hold for even longer into 2019."

Cost of loans to rise

Lower overseas (Chinese) property purchases would also add pressure to price declines, Mr Keen added.


Further, UBS says surveyed consumer sentiment measures suggest a very negative attitude towards housing.

"Despite record low interest rates, the 'time to buy a dwelling' index is about 20 to 25 per cent below its long-run average since 1974 and the proportion of respondents saying that the 'wisest place for saving' is in 'real estate' has collapsed to a record low," the banks says.

LF Economics led by Lindsay David and Philip Soos, who has been investigating systemic failures in banks and mortgage fraud, says the Hayne royal commission will also be the "game changer" for house prices.

Cost of borrowing will rise and the spotlight will be shone on "dodgy" interest only loans, Mr David says.

"With the frauds uncovered, financial markets will become nervous, wholesale investors may re-evaluate lending and credit markets could freeze. In an economy addicted to rising land prices – inflated by credit – this could spell a lot of trouble," he said.

But despite its bearish view on the market, LF Economics, says the bond yield curve - a warning beacon for a recession - has not shown any signs of a serious downturn.

"A sharp decline in housing prices must be preceded by the inverted yield curve, a significant fall in mortgage acceleration and sales but this hasn't happened," Mr Soos said.

"Mortgage debt growth and acceleration has slowed compared to previous years...however, there is no evidence of a serious downturn on the horizon, just Sydney coming off the boil. Melbourne, Hobart and Canberra are still going strong."