Housing affordability hits five-year high
Housing affordability has reached its most favourable level since 2019, according to research from Cotality.
The Official Cash Rate is now at its lowest level in three years, having fallen by 2.50 percentage points since August 2024. Meanwhile, national property values remain almost 17% below their post-COVID peak. These changes have driven the national value-to-income ratio down to 7.5 in the second quarter of 2025 – its lowest point since mid-2019.
Saving for a deposit remains challenging but has become less daunting, with the typical household now needing about 10 years to save a 20% deposit, compared to nearly 14 years in 2021.
Mortgage servicing costs improve
Cotality Chief Property Economist Kelvin Davidson said the biggest shift in affordability had 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.”
Positive news for affordability outlook
Mr Davidson said the August rate cut, and the prospect of further easing, would support buyers, but that prices were unlikely to accelerate in the near future.
“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. 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,” he said.
However, long-term structural issues still need to be tackled, according to Mr Davidson.
“New Zealand’s affordability challenges have been driven by a persistent imbalance between demand and supply. 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,” he said.
Contact me if you’d like to discuss how to make the most of current conditions while affordability remains favourable.