House prices could start falling as early as the middle of next year – by up to 3 per cent in Melbourne and 2 per cent in Sydney – as the Australian Prudential Regulation Authority imposes further lending restrictions, SQM Research’s Boom and Bust report predicts.

Capital city dwelling prices are expected to peak by the June quarter and would flatten towards the end of 2022, dragged down by the contraction in the Sydney and Melbourne markets.