Housing affordability across New Zealand has improved to its most favourable level in almost a decade, as lower property values, rising wages and easing mortgage rates continue to reduce pressure on buyers.
The latest Cotality NZ Housing Affordability Report for Q4 2025 shows the national value-to-income ratio fell to 7.2, the lowest level since a brief period in 2019 and before that 2016.
Although still slightly above the long-term average of 6.8, the figure represents a marked improvement from the stretched affordability conditions seen during the post-COVID housing boom.
Cotality NZ Chief Property Economist Kelvin Davidson said affordability has improved materially over the past three to four years as several market forces moved in the same direction.
“Lower property values, rising incomes and falling mortgage rates have all helped ease the pressure on buyers,” Mr Davidson said.
“Housing certainly isn’t cheap, but for those trying to buy their first home or upgrade, we’re currently seeing the best conditions in several years and a level of affordability that is much closer to the country’s historic norms.”
Mortgage costs return to more typical levels
Mortgage servicing costs have seen the most notable improvement with repayments accounting for 42% of gross median household income, in line with the long-term average.
Mr Davidson noted it’s been almost five years since mortgage servicing hit a peak of 56% recorded in early 2022 and again in late 2023.
“Servicing a relatively new mortgage is also back to around its normal levels and is much improved from the situation a few years ago,” he said.
“Mortgage affordability isn’t easy, but in the current lower interest rate environment it may not be the significant handbrake on medium-term house price growth that it was a few years ago.”
Deposit hurdle easing but still significant
Although saving a deposit has improved compared with recent years, it remains one of the largest barriers to the housing market for aspiring buyers.
The years required to save a 20% deposit has fallen to 9.6, down almost four years from a peak of 13.4 during the post-COVID housing surge.
Mr Davidson said while this figure remains above the long-term average of around nine years, the reduction highlights the positive impact of lower property values and stronger incomes.
“There’s no suggestion the market is affordable as it remains slightly more challenging than ‘normal’ however it has been on an improving trend in recent quarters and is certainly more favourable than the previous post-COVID boom period,” he said.
“Saving for a deposit is just one factor in measuring housing affordability and it currently takes four years less save a deposit than it might have done at the market’s peak. In addition, let’s not forget that a lot of first home buyers don’t actually need a 20% deposit anyway, with many taking advantage of the banks’ LVR allowances.”
Main centres show varying improvements
Affordability across the main centres showed a mixed picture in the December quarter, reflecting differences in how property values have adjusted since the market peak.
Tauranga remains the least affordable of the major centres, with a value-to-income ratio of 8.5 in Q4 2025. Although that figure has eased from its peak of 11.9 in 2021, affordability in the city remains stretched compared with most other main centres.
Auckland has seen one of the more notable improvements with the city’s value-to-income ratio at 7.5, slightly below its long-term average of 7.7, indicating housing costs are closer to typical levels than they have been in recent years.
Wellington is currently the most affordable of the main centres on this measure, with a ratio of 6.4, broadly in line with its long-term average.
Mr Davidson said the recent underperformance of property values in Auckland and Wellington had played an important role in restoring affordability in those markets.
“That adjustment has taken some of the heat out of markets that had previously become extremely stretched,” he said.
Hamilton, Christchurch and Dunedin have seen less improvement in affordability, as property values in those markets have remained more resilient and have shown modest growth in recent months.
Rental affordability still stretched
While affordability for buyers has improved, rental costs remain elevated. Rents currently absorb 27.9% of gross household income nationally, down slightly from a peak of 28.5%, but still above the long-term average of 25.8%.
Recent easing in rents in Auckland and Wellington has brought those markets closer to their long-term norms. However, Mr Davidson noted most other parts of the country continue to record relatively high rent-to-income ratios.
“Rental affordability remains stretched in a number of regions, and some tenants are likely to earn less than the median used in these measures,” he said.
“That means the real financial pressure for some households is likely to be greater than the headline figures suggest. When rents are already taking up a large share of income, there’s naturally less scope for further increases.”
Outlook cautious despite improving affordability
Improving affordability may reduce one of the key constraints on housing market activity this year, although other factors will continue to influence property values.
Mr Davidson said the outlook for the labour market, alongside lending restrictions such as the debt-to-income ratio rules, would continue to shape housing demand. Over the longer term, sustained improvements in affordability will require an increase to housing supply.
“Affordability may act less as a handbrake on property value growth than it has in recent years,” he said.
“But there are still limits on how far prices can rise in the near term. A lasting improvement in housing affordability ultimately requires more homes to be built, not just in absolute terms, but also relative to demand. The good news is that the Government is already pushing very hard on this lever.”
Note:
The Cotality NZ Housing Affordability Report measures housing affordability using the ratio of property values to household incomes, the share of income required to service a typical mortgage, the number of years needed to save a 20% deposit, and the proportion of income required to pay rent. The analysis draws on Cotality’s hedonic Home Value Index (HVI), income data from Infometrics, mortgage rates from the Reserve Bank of New Zealand, and rental data from MBIE tenancy bond figures.