Australian Prime Minister Kevin Rudd’s bid to ensure his housing market avoids the global property slump may push a generation of buyers into a debt crisis.

Grants of as much as A$21,000 ($16,142) to first-time buyers and the lowest interest rates in 49 years have emboldened more than 40,000 young Australians to take out home loans since October, stoking demand for properties that cost less than A$500,000.

These buyers may be vulnerable when interest rates begin rising, potentially triggering a jump in foreclosures.

'We’re mirroring what happened to the U.S. three years ago, when people who shouldn’t have been in the market bought houses,' said Martin North, managing director of Fujitsu Australia, a Sydney-based property-consulting company. 'It’s a strategy set for an unfortunate outcome.'

bloomberg.com