Housing affordability improved across several key measures during 2025, according to new data from the Ministry of Housing and Urban Development (HUD).
HUD said affordability improved for both people entering the property market and those seeking a new rental tenancy, with gains seen in saving for a deposit and servicing a mortgage.
What makes the current environment unusual is that deposit affordability and mortgage serviceability have improved at the same time. Typically, lower interest rates improve mortgage affordability but also push house prices higher, making it harder to save a deposit.
HUD measures affordability using its Change in Housing Affordability Indicators (CHAI), which compares housing costs against household incomes rather than looking at rents, house prices or mortgage rates in isolation.
The indicators track three areas:
- Rental affordability – changes in rents for new tenancies relative to income growth.
- Deposit affordability – changes in house prices relative to income growth.
- Mortgage serviceability – changes in incomes relative to mortgage interest costs.
Nationally, rental affordability improved by 3% over the year to December 2025. HUD said rents are still falling while incomes continue to rise, although the pace of improvement has slowed compared with earlier in the year.
Deposit affordability also improved, with household incomes rising 3% while house prices fell 1% over 2025. Mortgage serviceability remained positive in all regions, largely because interest rates have declined significantly from their 2022 peak.
Why affordability matters
The CHAI data is particularly useful for understanding pressures faced by people entering the market rather than existing homeowners.
For first home buyers, affordability is shaped by several moving parts at once – income growth, house prices, deposit requirements and interest rates. Improvements across multiple measures can make entering the market feel more achievable, even if prices remain high in absolute terms.
However, HUD noted that affordability experiences vary between households. Median figures do not necessarily reflect the realities faced by lower-income households or people paying different rents or mortgage rates.
HUD also warned that current conditions may not last indefinitely. The Reserve Bank has indicated interest rates have probably bottomed out, particularly if global inflation pressures intensify.
For now, affordability conditions appear more supportive than they have for several years.
Clients navigating today’s affordability conditions may appreciate guidance on how deposit requirements, interest rates and incomes interact. We’re always happy to chat if you’d like to put us in touch.
