Affordability rises as house prices, mortgage rates fall
Massey University’s latest Home Affordability Report shows an 8.7% improvement in national home affordability for the June quarter, following a 9.3% improvement in Q1 2025.
The surge reflects easing borrowing costs and higher wages, even as house prices remained elevated in some regions.
“It’s the continuation of a national trend we've been observing over the past year. While there is still regional volatility, the underlying indicators are showing more consistency,” Report author and Massey Business School senior lecturer Arshad Javed (pictured) said, according to an RNZ report.
Key national metrics for the quarter included:
- A 1.2% fall in the national median house price to $763,000
- A 37-basis-point drop in average two-year fixed mortgage rates to 5.66%
- A 1.65% increase in average weekly earnings
Annually, home affordability rose nearly 27%, thanks to a 1.72 percentage point decline in fixed mortgage rates, nearly 4% wage growth, and a modest easing in house prices.
Smaller regions drive strongest improvements
All 16 regions recorded year-on-year improvements in affordability, with the largest gains exceeding 30% in Northland, Manawatū-Whanganui, and Marlborough.
"In most of these regions, a combination of price stability or decline, falling mortgage costs and steady income growth contributed to the improvement," Javed said.
While half the regions saw house prices rise during the quarter, the other half either held steady or declined.
Javed noted that affordability improvements remained widespread despite localised variations.
“Property markets through the country were localised, but the overall picture was one of improving access to homeownership,” he said.
Rents more affordable – but not everywhere
Rental affordability also improved in the March quarter, up 3.5% due to a mix of falling rents and higher incomes. The improvement was split almost evenly between a drop in rents and rising average weekly wages.
However, the national picture masked regional disparities. While nine of 16 regions showed gains in rental affordability, others deteriorated – most notably Gisborne, where rents surged 41.2% during the quarter.
“It’s a timely reminder that affordability is highly localised and needs region-specific responses,” Javed said.
Gisborne also recorded the steepest annual decline in rental affordability. Despite this, nine of the 16 regions remained below the national annual average.
Investors reassessing property as returns flatten
The report comes as leading investment commentators call for a shift in capital allocation away from residential property.
Craigs Investment Partners’ Jeremy Williamson said New Zealanders’ long-standing preference for property may be limiting economic growth. “If we’re allocating capital into more productive asset classes the tax take from that downstream is going to increase anyway,” Williamson said, according to RNZ.
Infometrics chief forecaster Gareth Kiernan said rental property returns averaged 9.5% annually over the past decade – just ahead of KiwiSaver’s 9.34% average return – and warned that rising costs and stagnating price growth may weigh on future demand.
With the affordability outlook improving but investor sentiment shifting, the balance of returns versus risk in property is now under closer scrutiny than at any time in recent years.
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