Home affordability continues to improve in second quarter of 2025

The reports says the 8.7 per cent improvement in national home affordability for the three months to June 2025 was driven primarily by a decrease in mortgage interest rates, a modest drop in house prices and an increase in income levels. This follows a 9.3 per cent improvement in the first quarter of the year.

Quarterly results

The improvement in home affordability was underpinned by three key factors

• The national median house price which fell by 1.2 per cent to $763,000,
• The average two-year fixed mortgage rate dropped by 0.37 percentage points to 5.66 per cent
• Average weekly earnings rose by 1.65 per cent.

Northland recorded the most significant improvement in affordability, rising 20.3 per cent over the quarter. This was largely driven by a sharp decline in median house prices — down 13.6 per cent, or $99,000. Other regions with notable affordability improvement included Hawke’s Bay (up 12.5 per cent), Taranaki (up 11.7 per cent) and Auckland (up 11.5 per cent).

Affordability improved in 14 of the 16 regions covered by the report. The only exceptions were Southland and the West Coast, which saw minor declines of 1.0 and 3.9 per cent respectively. In both cases, affordability slipped despite modest wage growth, due to either static or rising house prices.

Report author, Massey Business School Senior Lecturer Dr Arshad Javed says the convergence of easing borrowing costs and positive wage growth is helping to offset affordability pressures in many regions, even where house prices remain elevated.

“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,” Dr Javed says.

Yearly results

On an annual basis, home affordability across the nation has improved by 26.8 per cent — a continuation of the positive trend first observed in early 2024.

The largest driver of this annual improvement was a significant fall in mortgage interest rates. The average two-year fixed rate dropped from 7.38 per cent in April 2024 to 5.66 per cent in April 2025, a reduction of 1.72 percentage points. Combined with a 3.8 per cent increase in average weekly incomes, this helped to counterbalance a relatively flat housing market, with the national median house price falling by just 0.9 per cent over the year.

All sixteen regions recorded an improvement in affordability over the year. The largest gains were seen in Northland (up 30.4 per cent), Manawatū-Whanganui (30.2 per cent) and Marlborough (30.1 per cent), followed closely by Auckland and Taranaki. In most of these regions, a combination of price stability or decline, falling mortgage costs and steady income growth contributed to the improvement.

House price movements over the year were mixed. Eight regions recorded annual price increases, while the other half saw either declines or no change. Southland recorded the largest increase (up 10 per cent, or $45,000), while Northland saw the most substantial decrease (down 5.8 per cent, or $39,000).

These mixed price movements highlight the localised nature of property markets across Aotearoa New Zealand, but the overall picture is one of improving access to home ownership.

General trends

The national house price-to-income ratio now sits at 9.5 times the average annual wage, slightly down from previous quarters. This measure provides a simple benchmark of housing accessibility and indicates that affordability, while still stretched in absolute terms, is gradually improving.

“Even with regional variation in house prices, income growth and reduced borrowing costs have continued to support affordability. We’ll be watching closely to see if this pattern holds in the second half of the year,” Dr Javed says .

The Home Affordability Report is produced quarterly by Massey University’s Real Estate Analysis Unit, based in the School of Accountancy, Economics and Finance | Te Kura Huinga Tahua.

Read the full Home Affordability Report – June 2025