"Our economics team are forecasting quarter-on-quarter house prices to fall from the March 2016 quarter before beginning to recover from June 2017," said Macquarie Research in a briefing note entitled: "Australian Banks: What goes up, must come down".

Macquarie said there would be a "7.5 per cent reduction from peak to trough".

Another economist says heavy household debt and softening house prices pose a greater recession risk to the Australian economy than the slowdown in China.

Bank of America Merrill Lynch Australian economist Alex Joiner says high historic indebtedness, coupled with the chance of a downturn in house-building and prices, could further crimp consumer spending and property investment once the Reserve Bank of Australia was forced to tackle inflation by lifting interest rates.

He said while the chance of a "hard landing" in the Chinese economy - on which Australia depends heavily for exports and inward investment - was small, a sharp decline in demand for housing in overheated markets such as Melbourne and Sydney was more probable and would drag the broader economy with it.

"We are not forecasting collapse or the bursting of any perceived bubble," Mr Joiner wrote in a note.

"That said, it is not difficult to envisage a more hard landing scenario in the property market.

"This would clearly have a greater negative macro-economic impact channelled through households and the residential construction cycle," he said.

His fears are based on current household indebtedness measures, which have soared to the highest ever.

These include the dwelling price-to-income ratio, currently at "never before observed" levels of five and a half times, and a household debt-to-gross-domestic-product ratio, which is at a "record high" 133.6 per cent.

Housing oversupply was also a risk, as population growth slowed and property prices in Australia's two biggest cities remained inaccessible to many, he said.

Mr Joiner's concerns chime with a number of other economists and analysts, who all argue that Australia's reliance on residential property construction and buying to fill the hole left by the downturn in mining infrastructure spending and, more recently, commodity prices, made the country vulnerable to a sudden downturn.

Efforts by the Australian Prudential Regulation Authority to lean against the stimulatory effects of record low interest rates by controlling speculative investment appear to be working, but could prove counterproductive, some argue.

"Housing has certainly been the sector keeping Australia afloat post the mining boom; however the sector appears to have peaked as regulators apply restrictive measures," wrote JCP Investment Partners' head of of institutional business Wes Campbell.

"Macro prudential policy tightening, tighter lending standards, interest-only loans being discouraged by regulators and the repricing of credit are all expected to negatively impact house prices and the demand for credit," he wrote.

He rated the chance of recession - after nearly 25 years without - as "elevated".

"The combination of weak disposable income and high household debt is concerning, particularly given Australia may have to raise interest rates in the future to follow the United States," Mr Campbell warned.

Macquarie also cautions that slowing population growth could eventually lead to an overhang in new housing supply, which could ultimately drive property prices down and leave over-leveraged households exposed to "negative equity", where the resale value of their real estate does not cover loan costs.

"Building approvals and housing commencements, at 200,000 plus, are running well ahead of estimated underlying demand, which we peg at 170,000 to 180,000 once current, and prospective, population growth rates are incorporated," wrote analysts James McIntyre and Kevin Ge on Monday.

They said supply had undershot demand for "several years", and this had been reflected in higher property prices. This would have to reverse, they argue, once supply outstripped demand.

"Improving affordability requires either lower house prices, lower interest rates, or stronger household income growth," they wrote.

"In the absence of robust wage and income growth in the economy, achieving the latter will be more difficult the longer that strong dwelling supply persists."

They forecast a slowing in housing starts in 2016 and 2017, particularly in the high-density apartments segment.

"This is likely to be accompanied by weaker dwelling prices, as the market struggles to absorb the currently bulging supply pipeline," they wrote.

Credit Suisse goes a step further, warning that property investment in Australia is now "riskier than the equity market", particularly in New South Wales.

"Home-buying conditions have deteriorated sharply," wrote equity analysts Damien Boey and Hasan Tevfik.

​"Surveys point to very weak home-buying sentiment in NSW, the state that had previously benefited the most from investor and foreign buying.

"Macro-prudential tightening, out-of-cycle rate hikes on investor mortgages, and weakness in Chinese buying are having a clear impact on sentiment and demand. 

"Housing is no longer the 'safe-haven' asset relative to equities," they said.

smh.com.au