Home affordability strengthened in the third quarter of 2025, driven by easing rates and steady incomes

The national index rose 1.6 per cent over the period July to September, reflecting a combination of slightly lower house prices, easing mortgage rates and steady income growth.

National median house prices dipped by 0.3 per cent in the quarter, led by significant decreases in regions such as the West Coast, Northland and Wellington. The West Coast experienced the largest drop at 10.5 per cent with the median house price down $45,000. On the flipside, this meant houses in the region were 13.1 per cent more affordable – the strongest affordability rise in the country over this quarter.

In contrast, Gisborne saw a sharp 16 per cent increase in median house prices, which were up $95,000, resulting in a 13.8 per cent decrease in affordability.

On an annual basis, house affordability has risen by 24.6 per cent nationally in the last 12 months, with improvements recorded in all 16 regions. Wellington saw the largest annual gain in affordability at 29.2 per cent, reflecting a combination of falling house prices and lower borrowing costs.

Report author Dr Arshad Javed, who leads the Real Estate Analysis Unit within the Massey Business School, highlights the combined effect of shifts across major affordability drivers for the continued rise reflected in the latest report.

“The overall improvement in home affordability in the third quarter is largely driven by a decline in mortgage interest rates, a drop in median house prices and a modest increase in household incomes.

Dr Javed highlights the role of long-term shifts in lending conditions for the upward trend.

“The two-year fixed mortgage interest rate decreased by 1.56 percentage points over the past year, while incomes continued to rise. These combined effects have contributed to significant improvements in national housing affordability.”

Mortgage rates continued a gradual downward trajectory, with the two-year fixed interest rate easing by 0.07 percentage points to 5.59 per cent in July 2025. This marks a return to medium-term stability after several years of tightening driven by the Reserve Bank’s inflation response.

Income movements were mixed across the regions, with half of regions reporting quarterly increases. Marlborough saw the strongest rise at 2.03 per cent, which helped reinforce its affordability gains.

National median house prices edged down 0.5 per cent compared to the same quarter in 2024, falling by $4,000 to $761,000. Most regions saw modest increases, with Northland and Wellington the only areas to record declines over the past 12 months.

The report includes updated regional comparisons, with affordability ranging from 56 per cent of the national average on the West Coast to 121 per cent in the Bay of Plenty.

The full Home Affordability Report – September 2025, including regional indices and detailed methodology, is available from Massey University’s School of Accountancy, Economics and Finance’s Real Estate Analysis Unit.

Read the full Home Affordability Report – September 2025.