The Government's package of income tax cuts helped improve home loan affordability last month by the most in nearly two years, a report shows.
But it's still not enough for a typical buyer, on a single income who has saved a 20 per cent deposit, to comfortably buy a home in New Zealand.
Houses are described as affordable when 30 per cent of an income is needed to repay a mortgage.
The affordability report, compiled by Roost Home Loans mortgage brokering group, shows it now takes 55.7 per cent of one median weekly take-home pay of $799.06 to pay the mortgage on a median-price house bought during October, down from 57.9 per cent in September.
This represented the biggest progress since a 6 per cent rise in affordability, from 60 per cent to 54 per cent, in January last year, when interest rates and house prices were falling sharply, the report said.
Home loan affordability is now back at levels seen in June 2004, before the housing boom.
Income tax cuts which took effect from October 1 improved median take-home pay by about $30 a week.
Margaret Smith of Roost said buyers had the upper hand in a market which had more choice for buyers.
"Home buyers have the wind at their backs," she said.
The national median house price was flat at $350,000 last month and is now down 3 per cent from a record high of $360,500 in March. The average two-year mortgage rate was flat at 6.73 per cent during October.
But there was no evidence that home buyers had taken advantage of the boost in home loan affordability last month, the report said.
The report shows it took 69 per cent of one median take-home pay of $847.75 to pay the mortgage on a median-priced house purchase in Auckland last month - making it the least affordable region in the country.
Based on current income and house prices it will take an individual 8.4 years to save the 20 per cent deposit required by most banks in New Zealand and 10.4 years in the Auckland region.