It is indeed a brave or silly person who takes on a 30-year mortgage in this environment. I would however suggest that these people will be fine. I actually don't expect the commodity producing countries like Australia and NZ to experience inflation...at least not at least whilst they allow their currencies to appreciate. The particular problem for NZ'ers though is that it is reliant on foreign savings. Maybe that makes them more vulnerable to the foreign cost of capital...but if bankers realise that NZ is offsetting foreign currency debasement with rising currency, then I see no reason for there to be such an imposition.
Having said that, I do think that it makes less and less sense to live in the city these days, or at least to pay a premium for it when increasingly people are living in rural areas because they have workplace and lifestyle flexibility. Why pay $300K for a crappy place in Auckland, when you can have a crappy place in Wanganui? The reality is that Wanganui cannot match the facilities of Auckland, but it has other benefits:
1. Access to outdoor activities
2. Proximity to everything
3. Easy living
Eventually those concerns will balance out....and there are bigger centres, or even the opportunity to live in more tourist i.e. growth-orientated places like Queenstown, which is already very expensive. The sad reality is that any 'growth story' is destined to be a basis for extorting higher prices by landowners with the sanction of government. Why? Smart landowners recognise that their land is more valuable if they can stop people subdividing theirs. So they campaign on the basis of 'anti-development', and in the process they get governments to sanction locking up the region from developers....under 'catch cries' like, we don't want the city people. i.e. Lifestylers. It does not even have to be about money...but usually it is. Their money, not yours. They think that because they were their first...they ought to have the right to control how things are. That is democracy people. It sux for everyone, but no one has the broader perspective to see it. They think that their is some redeemable feature to democracy. I will take all feedback. If you think democracy is good, let me know why, and I will repudiate it on my 'Democracy Sux' blog.
What the government is doing is locking people into mortgages for a lifetime. At the end of it, technology will have passed you buy, and you will be wondering why you were ever a slave to a mortgage? Why did you ever place yourself in such a place of vulnerability. We have lobbyists arguing that people cannot afford to buy a home. Lucky people! Its a prison sentence. Get the cheapest house you can buy and have the life you wanted to have. If that is a 'lifestyle' spend it, or save it, if you want to invest, better still, or set up a business. That is life. It gives you a sense of pride or efficacy. Being a slave to a house will lock you into a location you will probably not want to be, into a wife you no longer like, into a job you are scared to leave because of recession, and it will lock you into all manner of follies. The government loves it because:
1. You are always working and contributing to their spending power. The Tax Office loves women's rights, as it registered them as tax slaves as well.
2. You are supporting the welfare umbrella
3. You are establishing an asset base which they and the bank control.. They can always get you. You cannot funnel your assets offshore. That is getting harder anyway.
Read this story about a NZ family living the life of unhappy people. In 20 years, they will wonder why they ever bought the house...or maybe they will not wonder at all. 'Not thinking is the strongest form of sedative'.