New Zealand Housing Market Becomes More Accessible: Affordability Improves Sharply Thanks to Falling Interest Rates

The ability to buy a home in New Zealand has significantly improved, according to the latest housing affordability report from Te Kunenga ki Pūrehuroa Massey University. Compared to a year ago, home ownership is no longer a distant dream—especially for first-time buyers.

Falling Interest Rates and Rising Incomes – A Powerful Duo Driving Affordability

In the most recent quarterly housing affordability report, the affordability index rose by 9.3% from August to November. The main contributors were:

A 0.86% drop in mortgage interest rates
A modest 0.7% increase in average income

This marks a positive shift for the housing market, particularly as the economy continues to recover from a turbulent period.

“Falling interest rates are a key factor in improving housing affordability, especially when paired with rising incomes,” said Dr. Arshad Javed, Senior Lecturer at Massey Business School.

Home Prices Continue to Rise, Yet Affordability Still Improves

Although the national median house price increased by 3.9% (around NZD 30,000), affordability improved in most regions. Notably, Nelson saw a 17.8% boost in affordability, thanks to a 5.1% (NZD 35,500) drop in housing prices.

Conversely, Southland and Northland experienced sharp price hikes (18% and 16.1%, respectively) and were the only regions where affordability declined this quarter.

Nationwide Affordability on the Rise

Compared to the same period last year, housing affordability rose 19% across the country—even though house prices only saw a modest 0.6% increase. Key drivers include:

A 1.31% year-on-year drop in interest rates
A 2.9% increase in average income

Regions with the most significant improvement include West Coast, Marlborough, Wellington, Waikato, and Canterbury—all with over 20% gains in affordability.

A Long-Awaited Market Stabilization – A Window for First-Time Buyers

Experts agree that the housing market is entering a long-awaited stabilization phase. Hitting the required deposit threshold has become more feasible—even with interest rates still relatively high.

“House prices fell by 15–20% throughout 2023, creating a more accessible environment for first-time buyers,” said Gareth Kiernan, Chief Forecaster at Infometrics.

Tasman – The Most Expensive Region to Live In

Despite rising affordability, Tasman remains the most expensive region, with a cost of living at 123% of the national average. Auckland follows at 120%, and Bay of Plenty at 113%. On the other hand, the West Coast is the most affordable, at just 55% of the average living cost.

Is Now the Right Time to Buy a Home in New Zealand?

Many New Zealanders expect house prices to rebound to 2020 levels, mirroring the property boom seen after COVID-19 restrictions eased. The outlook is optimistic and reminiscent of that post-pandemic surge.

The latest ASB Housing Confidence Survey, conducted over the three months ending in December, revealed that 33% of respondents expect prices to rise, while 23% believe now is a good time to buy. However, buyer confidence overall remains cautious—likely a sign of lingering uncertainty.

For those considering purchasing a home, current conditions offer an ideal window: lower interest rates, falling home prices, and growing incomes. Still, it’s essential to assess average household income to avoid becoming burdened by mortgage repayments—especially amid ongoing global trade tensions.