A pair of reports provide an update on the soft landing in Australia. "High-risk lending in the recent housing boom has left some Australians struggling to meet mortgage repayments, forcing them to hand over properties to lenders. The housing bubble has burst and investors who jumped into the housing market 12 to 18 months ago are now seeking advice regarding problems with mortgages, says Sydney accounting firm partner Geoff McDonald."

"'You have had a culture of people who wanted to buy off the plan and borrow to buy, just to get in so they would not miss out and now (the market has) turned,' he said."

"All the signs are pointing to a very difficult road ahead for both homeowners and lending institutions, Mr McDonald said. 'There are going to be some sad stories involving highly geared properties and mortgages that cannot be met,' he said. Gearing is the ratio of debt to equity capital."

"Mr McDonald said many investors borrowed 80-90 per cent of the value of the home and property values have dropped in some areas, leading to negative equity for some borrowers. 'Not only are individual borrowers going to be hurt, but there may well be damage to lenders such as the banks and home loan originators,' he said."

"'The last time we saw this happen was in the 1980's and early 1990's,' Mr McDonald said. 'The banks got caught badly and Westpac lost in the order of $1 billion.' Mr McDonald questioned when the law suits would start rolling in against valuers for over pricing properties in deals done in 2003-2004."

"He was not convinced that lenders have made adequate provisions for the possibilities of such a downturn. 'I am seeing people who are admitting that there is a 10 to 20 per cent shortfall to the banks, and their bank hasn't started to take action yet,' he said."

"Mr McDonald's warnings were supported by the Australian Prudential Regulation Authority (APRA), which has voiced concern about high risk lending in the housing market. The concerns were raised after NSW Supreme Court showed a 60 per cent increase in repossession orders made against NSW homeowners last year, with more than 4,000 such orders in 2005 compared to about 3,000 in 2004."

"For those investors who have overextended themselves in the housing market, 'going bankrupt sooner, rather than later is something to seriously consider,' said Mr McDonald."

"Falling house prices in some places are 'not a cause for alarm,' the nation's top central banker says. Reserve Bank governor Ian Macfarlane said the central bank had no troubles with the slowdown in the housing market, including where prices for homes had actually fallen."

"'The fact that on average over the country house prices are flat is something that gives us some encouragement,' he said in evidence to a parliamentary committee today. 'The fact that they are falling in some places is not a cause for alarm in our view, particularly if they're falling in the place where they previously had the biggest boom, that seems to me perfectly normal.'"