Housing affordability across New Zealand has improved significantly, with the latest analysis from Cotality showing conditions are now the most favourable they have been in several years.
The national value-to-income ratio fell to 7.2 in the December 2025 quarter. That is the lowest level since a brief period in 2019 and, before that, 2016. While the figure remains above the long-term average of 6.8, it represents a substantial improvement compared with the stretched affordability seen during the post-covid housing boom.
Cotality Chief Property Economist Kelvin Davidson said several factors had combined to ease pressure on buyers.
“Lower property values, rising incomes and falling mortgage rates have all helped ease the pressure on buyers,” he 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 servicing pressures ease
One of the biggest improvements has been in the cost of servicing a mortgage. Mortgage repayments now account for about 42% of gross median household income, broadly in line with the long-term average. That is a marked change from the peak of 56% recorded in early 2022 and again in late 2023.
Mr Davidson said the current interest-rate environment had played an important role.
“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,” he said.
The time required to save a 20% deposit has also improved. It now takes an estimated 9.6 years to save a typical deposit, down from a peak of 13.4 years during the post-covid boom. Although this remains slightly above the long-term average of nine years, the improvement reflects both lower property values and stronger household incomes.
What this means for the housing market
Improving affordability may remove one of the key constraints that has held back housing activity in recent years. However, Mr Davidson said other factors would continue to influence the market, including the employment outlook and lending restrictions.
Over the longer term, he added, meaningful improvements in affordability will depend on increasing housing supply relative to demand.
If you are thinking about buying your first home or upgrading to a new property, improving affordability could create opportunities throughout 2026. Contact us if you would like guidance on your borrowing options and how current lending conditions might affect your plans.
