Our very own sub prime crisis

We will be paying for Kevin Rudd's stimulus in the most horrible way:

Meanwhile, the first-home buyer end of the market has been booming.

But economists fear this flurry of activity at the lower end has inflated prices to unsustainable levels.

In Sydney, the average property already costs nine times the average household income, while the UK and US reached a peak of only seven times average income before their markets crashed.

According to Professor Keen, the First Home Owner Grant has cost the government about $200million, but has inflated property prices by close to $3billion.

"This is all illusionary wealth that could disappear very quickly," he said.

"The additional $2.8billion or so has come from increased mortgage debt taken on by those most vulnerable to a serious economic downturn at a time when we can see very clearly that the global recession is coming our way."

The Government may well extend the first-homebuyer grant beyond its planned end-date of June 30, which Professor Keen says will end up pumping the market to even higher levels.

The University of Western Sydney professor said he had sold his Sydney house because he feared a property crash, but his gloomy view on the market has been backed by other experts.

Gerard Minack, chief economist at Morgan Stanley, said property prices were likely to fall by 20 per cent in some cities, while the value of houses on coastal strips such as the NSW mid-north coast and the Gold Coast could halve.....

"Traditionally what has hurt people has not been rising interest rates but rising unemployment. I don't care what rate you're paying, if you have a mortgage five times your income and you lose your job, you're toast."

In the 1990's I worked for Centrelink and remember how high interest rates destroyed families. Looks like we could be seeing a repeat. I'm going to use any stimulus handout to reduce my mortgage and hope I can hang on to my job for the next few years. On the brightside there should be some nice affordable Queensland properties coming on the market .