A new Cotality report says housing affordability is much closer to the country’s historic normal. Photo / 123RF
Housing affordability in New Zealand has improved to its best level in almost a decade, according to new data from Cotality.
Lower property values, rising wages and easing mortgage rates have helped reduce pressure on buyers.
Cotality NZ’s Housing Affordability report, covering Q4 in 2025, shows the national value-to-income ratio fell to 7.2 – the lowest level since a brief period in 2019 and before that 2016.
The long-term national value-to-income ratio average is 6.8.
Cotality NZ chief property economist Kelvin Davidson said affordability has improved materially over the past four years as several market forces moved in the same direction.
“Housing certainly isn’t cheap, but for those trying to buy their first home or upgrade, we’re currently seeing a level of affordability that is much closer to the country’s historic norms,” Davidson said.
Notably, mortgage servicing costs have improved, with repayments accounting for 42% of gross median household income, down from a peak of 56% in late 2023.
“Servicing a relatively new mortgage is also back to around its normal levels and is much improved from the situation a few years ago,” Davidson said.
“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.”
However, saving for a deposit remains a significant barrier to entering the housing market.
The years required to save a 20% deposit fell from 13.4 during the post-Covid housing surge to 9.6, still above the long-term average of nine.
Davidson said the reduction highlights the positive impact of lower property values and stronger incomes.
“Saving for a deposit is just one factor in measuring housing affordability and it currently takes four years less to save a deposit than it might have done at the market’s peak,” he said.
“In addition, a lot of first home buyers don’t actually need a 20% deposit anyway, with many taking advantage of the banks’ loan-value-ratio [LVR] allowances.”
Davidson said affordability may act “less as a handbrake” on property value growth than in previous years.
“But there are still limits on how far prices can rise in the near term,” he said.
“A lasting improvement in housing affordability ultimately requires more homes to be built, not just in absolute terms, but also relative to demand.
“The good news is that the Government is already pushing very hard on this lever.”
Rental affordability still ‘stretched’
While affordability for buyers has improved, rental costs remain elevated, the report said.
Rents currently absorb 27.9% of gross household income nationally – slightly down from a peak of 28.5% but still above the long-term average of 25.8%.
While rents had eased in Auckland and Wellington, bringing both markets closer to long-term norms, most other parts of the country continue to record relatively high rent-to-income ratios, Davidson said.
“Rental affordability remains stretched in a number of regions, and some tenants are likely to earn less than the median used in these measures.
“That means the real financial pressure for some households is likely to be greater than the headline figures suggest. When rents are already taking up a large share of income, there’s naturally less scope for further increases.”
Figures released by Barfoot & Thompson yesterday showed rental demand rose for the third consecutive month, but rents remained largely flat.
Barfoot & Thompson said it received 32,749 inquiries from renters during February, up 6.2% on January (30,850) and 35.5% higher than the same month last year (24,169).
Applications for properties also increased to 4349, up 6.7% on January and 27.8% year on year.
In Auckland, the average rent in February was $696.92, just 0.7% higher than a year ago ($692.38).
Average rents across Northland and Bay of Plenty moved less than 0.2% between January and February.
“This dynamic, between rising demand and flat rents, points to the continuation of a price-sensitive renters’ market,” said Barfoot & Thompson’s general manager property management, Anil Anna.
“Competition remains strongest among landlords to attract or retain quality tenants.”