House prices in Australia will fall by about 10 per cent over 2019 and 2020, although a US-style housing collapse won't happen, according to a new paper from Capital Economics. 
"We are more worried than most and suspect that, after hardly rising at all over the next couple of years, house prices in Australia will fall outright in both 2019 and 2020," said Capital Economics chief economist Paul Dales, who wrote the paper.
Mr Dales noted that the Australian housing market looked even more vulnerable to a large fall in house prices than the US did prior to the Global Financial Crisis. In   February, Jonathan Tepper, founder of macroeconomic research group Variant Perception, predicted a property market crash of 30 per cent to 50 per cent.
"The 350 per cent rise in prices in Australia since 1990 eclipses the 140 per cent rise in the US before its bubble burst," said Mr Dales.
"And on some measures housing in Australia looks at least as overvalued as it was in the US at the peak of the boom."
During the global financial crisis, US house prices fell by 30 per cent.
But Mr Dales noted there were large differences between the two markets, notably that the lending standards in the Australian market weren't as loose as in the US.
Just 9 per cent of housing loans in Australia are issued to borrowers with a deposit of less than 10 per cent. In the US, at the peak of the housing boom, it was 29 per cent. In Australia the outstanding value of subprime-type loans is worth 2 per cent of housing loans. In the US, that number peaked at 14 per cent.
But Mr Dales said prices would "inevitably" fall in Australia given how far prices have risen to disposable income.
"We suspect that the catalyst will be interest rates, although that trigger won't be pulled until 2018 at the earliest, he said.
Mr Dales estimated house prices would rise 4.5 per cent this year, followed by 2.5 per cent growth next year, before holding steady in 2018 and falling by 3 per cent in 2019 and a further 5 per cent in 2020. That would be a cumulative fall of 10 per cent spread over two years.