Kelvin Davidson: Cotality Chief Property Economist on housing affordability reaching a decade-best level

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. 

Mortgage servicing costs have improved, with repayments accounting for 42% of gross median household income, down from a peak of 56% in late 2023. 

Chief Property Economist Kelvin Davidson told Mike Hosking that the housing market isn’t cheap and getting into it is not easy, but it’s easier than it’s been for quite some time.  

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Episode Transcript

Speaker 1 (00:00):
Good news back home though from the Housing Department, affordability
is near decade best levels. This old value to income
ratios fall into seven point two. This is for the
December quarter. By the way, movement to in mortgage servicing.
It's down to forty two percent of your household income.
And for good measure, the deposit hurdle is easing as well.
It's down to nine point six years. It was once
but that's for twenty percent. It was once a time,

(00:21):
once upon a time, thirteen years anyway. Kelvin Davidson is
catality's chief property economist and is with us Calvin, good morning.
That forty two percent of my forty two percent of
my income is on the mortgage now and it used
to be hired. Does that money get spread elsewhere and
this is good news for the economy?

Speaker 2 (00:38):
Oh yeah, for sure. Yeah. Absolutely. If you're spending less
on your house, you've got a got more cash to
spend elsewhere. So yeah, I mean, I think the point
is still that housing is cheap. Definitely not saying getting
into the housing markets easy, but it's certainly easier than
it's spent quite some time, and that will help the
wider economy. But there are still some challenges first timed
by certainly in terms of the deposit, but once they've
cleared that hurdle, actually servicing mortgages is easier than it's

(01:01):
been for a while.

Speaker 1 (01:02):
Let me come back to the deposit in the moment,
the forty two percent. Does that take on board people
who are also not needing to spend forty two percent?
In other words, they are head on their mortgage or not.

Speaker 2 (01:12):
Yeah, well that's that's that's an average, And yes, we
know at the moment there are some people who have
made the pretty provent decisions of getting ahead of their
loans in terms of when interest rates fail, they keep
the payments the same and reduce the terms. So yeah,
it includes all sorts, but generally the average has improved
a lot.

Speaker 1 (01:30):
The deposit thing though, at nine point six that these
are vrs, the debt to income, are they in the
loosening of are they working?

Speaker 2 (01:38):
Yeah? Well, I mean, I think one thing we've seen
through the cycle is that repayment stress has not been
a big deal. We haven't seen mortgage e sales, we
haven't seen non performance loans, So I think it tells
you that credit standards have been to fin this time around,
the lvrs and DTIs are helping. Now. The thing about
the deposit heard or is still a challenge for sure,
but a lot of first time live are giving in

(01:59):
without twenty percent deposit. The thing about the olvrs, this
is an allowance to end below twenty percent posit, So
still a hurdle, but lots of people don't need twenty percent.
They're getting on with a lot less. So given what.

Speaker 1 (02:10):
We've seen, still getting in okay. Given what we've seen, though,
it would appear correct me if I'm wrong, it would
appear that the days of mass house increases price wise
are gone. Given that, and given that that's what in
part drives the fear around the size of a deposit,
can we not go a little bit looser on the
deposit therefore get more people into housing?

Speaker 2 (02:30):
Yeah? Possibly. I mean there's a bank that is the
OLVR rules on first of December, so they didn't actually
use the deposit requirement the speed limits, so they said
the bank you can now lend more at low deposits.
So so and that speed limit is still quite high.
We're not we're not really testing there at the moment.
So I think there's still a wee bit of caution
out there from both banks and borrowers. Still a bit
of header and there in terms of low deposit ending,

(02:52):
So probably no great pressure on that just yet. But yeah,
that's always an option that the bank has.

Speaker 1 (02:56):
For sure, banks have pulled back on what they think
is going to happen wise for houses this year. Does
this sort of material change that in other words of people,
you know get ahead of steam and we're often running.
Does that you know by the end of the year
we seeing a better number or not?

Speaker 2 (03:11):
Well? I think this, I mean, here's the old car analogy.
I think this is probably the handbreakers off. But we're
not crips on the accelerated yet. I mean, affordability is
sort of the neutral. But I don't think it necessarily
kickstarts house prices either because there are still restraints. There
are things like the DT eyes, but it strats down
economy recovering a bit of confidence coming back. I think
we will see some growth in house prices, but post

(03:34):
COVID boom pretty unlikely. I think you're more looking at
single digits rather than double digits.

Speaker 1 (03:39):
Great stuff, Kelvin, Good to have you on the program.
As always, Kevin Davidson out of cautality from trade me
this morning. They're asking price, which I'm not a fan
of because what you asked when what you get are
two different things. Anyway, eight hundred and eighty three this
is for February eight hundred and eighty three thousand. It's
a sustained three point one percent month on month increase.
A lot of places up. The only places I can
find a met idiately than to materially down a Hawks Bay,

(04:02):
Marlborough and Taranaki. Apart from that, everyone downe North AND's
not very good. But the rest of the country seems
to be doing okay. And we've got to stop this
handbreak thing. How long before because most handbreaks are automatic
now therefore we don't apply the handbrake anymore, So how
long before we don't go Well, it's the old car
analogy with the handbreak. There is no handbreak, so we
can't do it. There's still an accelerator. And my next

(04:24):
question was is youre caw petrol or electric? Given that's
you know, that's front of mind at the moment. But anyway,
I'll move on now for more from the mic asking
breakfast listen live to news talks.

Speaker 2 (04:34):
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