This week on Inside Business, Alan Kohler interviewed Jonathan Plain, Chief Investment Strategist at HFA Asset Management on Unsustainable Lending Practices.

Jonathan mentioned many of the facts we have raised here.

“In actual fact, our house prices have risen more than they have done in Britain and the United States of America.

And we here in Australia very, very sadly have also turned our homes into glorified bank ATMs, and hence as a consequence of that household debt in Australia now is at an all time record high as in absolute terms and as a multiple of income.

If you look in fact at house prices in Australia over the last 80 years on an inflation adjusted basis, we are currently approximately 30 per cent above that 80 year trend line. So in actual fact for us just to get back to the trend line we would need to decline by 30 per cent so a 20 to 25 per cent decline is possibly quite conservative”

» Alan Kohler speaks with Jonathan Plain (Windows Media) - The ABC’s, Inside Business, 26th June 2008.

» Alan Kohler speaks with Jonathan Plain (Transcript) - The ABC’s, Inside Business, 26th June 2008.

ANOTHER 72,000 households joined the ranks of the mortgage-stressed last month as family wealth plummeted over the three months to March — the largest quarterly decline on record.

The number of households struggling to meet mortgage repayments jumped 15% to 784,000 in May and is likely to reach 923,000 by September, Martin North, head of Fujitsu Consulting, predicted.

» 900,000 households face mortgage stress - The Age, 29th June 2008.

The Sydney Morning Herald today has run an balanced article on the Housing Bubble and the level of household debt. It gets the views of several experts including Morgan Stanley’s Gerard Minack, the University of Western Sydney’s Associate Professor Steve Keen and Michael McNamara, general manager of APM.

People aren’t stupid. If housing is unaffordable, buyers will stay away, regardless of the lack of supply. “My view remains that property prices can fall 30 per cent across the board,” says Minack [Gerard Minack, from Morgan Stanley]. This includes big falls in the top end of town.

“But all I can say is that we’ve got a housing sector that’s far more indebted than America’s, with a housing stock that’s far more expensive than America’s. We may have avoided a subprime crisis but we could be heading for a prime crisis.”

A recent speech by Tony Richards, the head of the Reserve Bank’s economic analysis unit, illustrates the comparison between the US and Australia. Richards showed a graph illustrating that, at their peak, US home prices were a bit more than triple average yearly income. In Australia, house prices equal six times annual average earnings.

Steven Keen says :

Indeed, Australian households now devote 11 per cent of after-tax income paying interest on debt. In the late 1980s, when interest rates hit 17.5 per cent, interest payments chewed up 6.7 per cent of income.

» Heads in sandcastles - The Sydney Morning Herald, 28th June 2008.

Australia’s banks have been bundling mortgages into securitised packages to access emergency funding from the Reserve Bank, if they were ever to strike cash troubles.The RBA’s assistant governor of financial markets, Guy Debelle, has revealed eight Australian banks had taken the advice of the central bank and APRA, the prudential agency, to package and securitise residential mortgages which had been held on their balance sheets.

The move would allow the banks to effectively swap the residential mortgage-backed securities (RMBS) with the Reserve to secure funding quickly if it was facing a liquidity shortfall.

» Banks prepare for worst - The Age, 28th June 2008.

IT COULD be a warning sign, or maybe just a blip. Property sales are flashing a signal that the fall in Sydney house prices will not be limited to the city’s west.An analysis of 2008 sales reveals that the great Sydney equation - take property, mix with water views, and you cannot go wrong - could be breaking down.

» House prices head south, north and east - The Sydney Morning Herald, 28th June 2008.

NEW YORK (MarketWatch) — U.S. stocks fell sharply Thursday with the blue-chip index enduring its worst June so far since 1930, and plunging to its lowest finish since Sept. 11, 2006, after getting slammed hard as crude soared to new highs and Goldman Sachs disparaged U.S. brokers and advised selling General Motors Corp.

» U.S. stocks plunge; worst June for Dow since Great Depression Market Watch - 26th June 2008

Revealed: the biggest new homes crash in 70 years - The Evening Standard - 25th June 2008

US house prices dropped 22.8 per cent over the last three months as American consumer confidence slumped.

Wall Street economists described the statistics as “incredibly awful” and indicated that the likelihood of the US Federal Reserve raising interest rates tomorrow was very remote.

However, the housing recession - which shows no sign of abating - record petrol prices and rising food costs have conspired to offset the impact of the fiscal stimulus package.

Weak US house prices fall 23pc - The Australian, 25th June 2008.

Once seen as a sure-fire way of making a small fortune, newly-built flats have become the worst victims of the housing market meltdown.Prices of new-builds in city centres have collapsed, with many sold at auction for a fraction of their value only two years ago.

In one case, a three-bedroom flat in Kelso Heights, a development on Belle Vue Road in Leeds, was bought for £237,999 in March 2006 but has just sold for £71,000 – a fall of £166,999, which is 70.17 per cent.

» Recession UK: The £238,000 flat that has lost 70% of its value in two years - The Daily Mail, 24th June 2008.

CHICAGO (MarketWatch) — The housing slump, already shaping up to be the worst in a generation, still hasn’t run its full course, according to Harvard University’s annual report on housing, released on Monday.And if job losses accelerate in coming months, it could take even longer for local markets to regain their footing, said Nicolas P. Retsinas, director of the university’s Joint Center for Housing Studies. Job losses could be “the last shoe to drop, but a pretty heavy shoe,” he said in a telephone interview.

» Housing slump rivals deepest slowdowns in 60-plus years: Report - Market Watch - 24th June 2008.

TWELVE of the 20 areas with the highest mortgage delinquencies in Australia are located in NSW, according to credit rating agency Moody’s Investors Service.”I expect the short-term default rate to continue to rise, driven by the cost of living, such as higher petrol prices and so on,” Moody’s senior analyst Ilya Serov said.

» NSW worst for home mortgage delinquency - The Australian, June 18th 2008.

The slide in house prices will continue for at least three years and crush the value of a home by almost 50% in real terms, according to a key index of property price futures. Indications from futures trading on long term property prices shows that the average UK home will recover its current value only in 2017.

“This government says this housing depression will be different from the early 1990s. Yes, that’s right. It will be worse.”

» Traders predict house prices will fall by 50% in four years - The Guardian, 9th June 2008.

AUSTRALIA’S housing market took its biggest quarterly dive in five years in the first three months of this year, according to the latest survey figures.

» Record slump in house prices - news.com.au, 7th June 2008

SYDNEY’S rental crisis might not be nearly as bad as the real estate industry would have you believe, new figures show.

The Real Estate Institute of NSW, which last year predicted a rental squeeze so bad rents would rise by 20 per cent, says Sydney’s current rental vacancy rate is 0.9 per cent.

But data compiled exclusively for the Herald by property specialist SQM Research shows the rental vacancy rate in some suburbs is as high as 10 per cent.

» Rental shortage hyped up: researcher - The Sydney Morning Herald, June 7th 2008