Source: Cotality
Lower mortgage rates, steady income growth and a decline in property values have combined to improve housing affordability across New Zealand, easing the burden on households.
The Official Cash Rate is now at its lowest level in three years, having been reduced by 250 basis points since August 2024, while national property values remain almost 17% below their post-COVID peak despite more recent signs of stabilisation.
Cotality NZ’s latest Housing Affordability Report shows these factors have contributed to a national value-to-income ratio of 7.5 in Q2 2025, the lowest level since mid-2019. The time required to save a deposit has also reduced to 10 years, compared to almost 14 in 2021 and not far above the long-term average of 9.1.
While the metrics remain higher than their historical norms the differences aren’t huge, and Cotality NZ Chief Property Economist Kelvin Davidson said the most significant change has been in mortgage serviceability.
“Mortgage repayments now absorb around 44% of median household income, compared with a peak of 57% in 2022. That takes servicing costs back to their lowest level in more than four years and only marginally above their long-run average of 43%,” he said.
“Servicing costs at or near their long-term average suggest that affordability is no longer the handbrake it was during the downturn. That doesn’t mean housing is suddenly cheap, but it does mean buyers and existing borrowers are operating in conditions that are much more manageable than they were a few years ago.”
Regional differences
Affordability gains have been most visible in Auckland, Tauranga and Wellington, where mortgage repayments are now sitting slightly below their long-term norms, a notable turnaround from conditions only 18 months ago.
Tauranga remains the least affordable of the main centres in absolute terms, with house values sitting around 8.5 times household incomes.
Mr Davidson said while the figure remained relatively high, it was a significant improvement from the peak of nearly 12 in late 2021.
“Relative to its own history, Tauranga is now only a little more stretched than normal, and in fact looks more fairly priced than Hamilton, Christchurch and Dunedin, where affordability has not improved to the same extent,” he said.
Auckland’s conditions have also improved, with a value-to-income ratio of 7.9 the lowest level in a decade, while Wellington sits at 6.4, back in line with its long-run average for the first time since 2016.
“Wellington is not suddenly a cheap market, but it is more affordable than it has been for many years,” Mr Davidson said.
“The fact that key measures are now back at long-term norms in a number of key centres is a clear sign of how far conditions have adjusted, and helps to explain the renewed interest we are seeing from some buyer groups.”
By contrast, Hamilton, Christchurch and Dunedin have seen more limited improvements, as property values in those cities have been more resilient.
Rental affordability
Nationally, the rent-to-income ratio sits at 28%, compared to a long-term average of 26%.
Auckland and Wellington are broadly aligned with their historical levels, at 25% and 23% respectively.
Mr Davidson said while those figures suggested conditions in the two largest centres had normalised, the picture was more challenging elsewhere.
“In Hamilton, Christchurch and Dunedin, households are now spending close to 30% of their income on rent, which is a record high for each of those markets,” he said.
“That’s at least three percentage points above normal, and reflects the fact that incomes in those cities have not kept pace with the steady increases in rents.”
He added that rental conditions in Tauranga had not improved either, with the highest rent-to-income ratio of any of the main centres at 34%.
“Overall, although housing affordability has improved for buyers, renting remains challenging. It’s even more stretched for households that are having to pay typical rents but perhaps have below average incomes.”
Affordability outlook
Mr Davidson said the August rate cut and the possibility of further easing, could provide additional relief for borrowers and underpin housing activity in the months ahead.
“With mortgage servicing costs already back around long-term norms, affordability is unlikely to constrain the market to the same degree it did during the downturn,” he said.
“However, the wider backdrop remains important. The labour market is subdued, debt-to-income restrictions are in place, and housing supply is still elevated in many areas. These factors are likely to moderate the speed of any recovery, which is great for housing affordability”
Beyond the immediate cycle, Mr Davidson noted that structural factors remain critical to the country’s long-term affordability issues.
“New Zealand’s affordability challenges have been driven by a persistent imbalance between demand and supply,” he said.
“Sustained progress will depend on delivering more dwellings, more land and the infrastructure to support growth – both in terms of property available to buy and for renters. Recent policy moves are encouraging, but addressing supply will take sustained effort over many years.”
