First home buyers are leaping aboard a sinking ship, with house prices set to fall about 20% in the next two years, an Australian National University economist says.

Professor Quentin Grafton said house prices could not continue to grow at a faster rate than incomes and consumer prices.

This 'property bubble' was about to deflate, he said, and first-timers, encouraged through government grants to buy at the top of the market, could be over-committed when hit by job losses and, later, higher interest rates.

'First home buyers who don't have much of a deposit and can barely afford their mortgage payments on the current interest rates, they'll be in trouble,' Professor Grafton said.

'I wouldn't be surprised if overall we get a 20% decline in nominal house prices over about the next two years.'

The Age