Housing Affordability: It’s Better Than You’ve Been Told
- Kieran Trass
- Aug 28
- 4 min read
New Zealanders have been told for decades that housing is “seriously unaffordable.” The claim usually rests on the Median Multiple which is the ratio of median house prices to median household incomes, an affordability measure adopted by the World Bank in the early 1990s when mortgage rates were above 10 percent. By that measure, Auckland’s current multiple of 7.9 suggests the city is in crisis territory.
But this picture doesn’t stack up against the reality of how people actually buy homes and how banks actually lend. Homes continue to be bought and sold, first-home buyer activity remains strong, and borrowing rules have always allowed households to take on mortgages well above the supposed “safe” limit.
The truth is that the Median Multiple is a poor guide to affordability.
The Flaws of the Median Multiple
The problem with the Median Multiple is that it ignores one of the single biggest drivers of affordability: mortgage repayments. What matters is not just the price of a home against income, but how much of that income is needed to cover repayments at prevailing interest rates.
For decades, commentators have argued that housing becomes “unaffordable” once repayments exceed 30% of household income. In practice, New Zealand banks have long worked on a more generous, and realistic, benchmark of up to 40% of gross income. That is one of the major thresholds lenders have typically applied when testing whether borrowers can meet their obligations.
This explains why households routinely buy homes at levels that look “unaffordable” under the old 30% rule, yet continue to manage repayments within bank approved limits.
It’s like judging how far a car can travel based on the size of the fuel tank and ignoring fuel efficiency, just as lower interest rates make mortgages more efficient/affordable even when house prices are higher.
Another flaw is the way affordability is often presented as a “10 years to save a deposit” challenge. This assumes a household on the median income must save 15% of gross income every year until they reach a 20% deposit on a median priced property. In practice, this is not how most buyers enter the market. Many first home buyers purchase with deposits of 5–10%, often supported by KiwiSaver withdrawals, family contributions or Welcome Home Loan exemptions.
Existing owners rarely save much if any at all, they recycle equity from their current property. The idea that every buyer must save for a decade to meet a 20% target is a theoretical construct, not a real world barrier.
A Better Measure: The Staircase Affordability Index (SAI)
The Staircase Affordability Index (SAI) was developed to capture a more accurate picture. Instead of relying on outdated ratios, it measures what percentage of income a household actually needs to service a mortgage based on the median household income and the median house price at prevailing rates. It also recognises the cyclical nature of the property market, how affordability improves markedly at specific phases of the cycle, just before renewed price growth.
More Affordable Today Than in 2005 or 2015
The findings challenge many of the assumptions that dominate the affordability debate. Despite higher nominal house prices, the SAI shows that Auckland’s housing affordability today is better than it was 10 years ago in 2015, and even more so than 20 years ago in 2005. In Auckland, repayment burdens in 2025 are now below the long term average.
Consider This
The multiple myth exposed: By price-to-income logic, Auckland has been “seriously unaffordable” for more than 20 years. Yet in that time, over 500,000 homes have changed hands, lending has continued, and ownership has not collapsed. Today that measure is 7.9 considered to be “seriously unaffordable” and bordering on the World Banks “impossibly unaffordable” level of 9.0. The measure is not just outdated it is misleading.
More affordable than 10 and 20 years ago: The SAI reveals that Auckland households on a median income buying a median priced home would today spend a smaller share of income on mortgage repayments than they would have in both 2015 and 2005. Higher prices have been offset by lower interest rates and stronger incomes.
Bank stress testing: The “buffer” interest rates used by banks when assessing new loans have fallen sharply in 2025, increasing borrowing capacity and reducing repayment strain. Combined with the long-standing acceptance of up to 40% of gross income for housing costs, this helps explain why more households qualify for finance.
Cyclical positioning: Mortgage burdens peaked in 2021–22, when repayments consumed over 60% of household incomes. Since then they have eased back below long-term averages, exactly the conditions that have historically preceded renewed market growth.
The idea that households must spend 10 years saving a 20% deposit is misleading, since many first home buyers purchase with smaller deposits or recycled equity rather than following this theoretical path.
First home buyer activity: First home buyers now account for more than a quarter of all purchases. If property ownership were truly “impossibly or highly unaffordable,” this level of participation would not be possible.
The Bigger Picture
Affordability is not defined by a single ratio written in the 1990s, nor by abstract savings assumptions that ignore how real buyers fund deposits. It rises and falls with interest rates, incomes, bank stress tests, equity recycling, and the property cycle.
The SAI shows that conditions in 2025 are more favourable than many assume and better than they were for buyers a decade or even two decades ago.
The Real Cost of Misinformation
There’s a story being told today that home ownership is permanently out of reach. It sounds convincing. It spreads fast. And it is dangerously wrong.
The truth? We are living through one of the most affordable moments in the market in years. Yet too many people are being convinced not to even save for a deposit, not to take the first step, not to try.
And that’s the real tragedy. A generation who could own their own homes risks being locked into a lifetime of renting, missing out on stability, security, and the financial freedom that only ownership provides.
Spreading the myth that houses are “too expensive” isn’t just misleading, it’s morally wrong. Because it doesn’t just cost people money. It costs them their future.
