A significant drop in house prices at the most affordable end of the market has improved housing affordability for first-home buyers at the start of 2026. The national lower quartile selling price – the price point at which 25% of sales fall below – declined to $580,000 in January, down from $609,000 in December, according to the latest data from the Real Estate Institute of New Zealand (REINZ).
This marks the second consecutive monthly decline, with the lower quartile price now $36,000 lower than it was in November. Declines were widespread, occurring in all regions except Nelson/Marlborough and Southland. Auckland experienced one of the largest drops, with the lower quartile price falling by $42,000, followed by Taranaki (-$35,300), Hawke’s Bay (-$35,000), and the Wellington Region (-$25,000).
The January figures indicate Auckland’s lower quartile price at its lowest point since September 2020, even as Wellington’s reached its lowest level since August 2020. The decline coincides with a modest increase in mortgage interest rates. The average two-year fixed mortgage rate charged by major banks rose from 4.49% in November to 4.74% in January, according to Interest.co.nz.
Despite the rising interest rates, the impact on mortgage payments has been offset by the falling house prices. Interest.co.nz estimates that mortgage payments on a home purchased at the national lower quartile price with a 10% deposit decreased to $717 per week in January, down from $751 in December – a reduction of $34 per week. In Auckland, mortgage payments for a lower quartile-priced home with a 10% deposit fell from $974 to $924 per week, a reduction of $50.
This improvement in affordability is particularly notable when considered alongside incomes. For a couple working full-time and earning the median rate for 25-29 year olds, estimated at $2225 per week after tax, a $717 weekly mortgage payment represents just under 32.2% of their take-home pay. Housing is generally considered unaffordable when mortgage payments exceed 40% of after-tax income.
According to these measures, national housing affordability is now at its best level since June 2021. Even in Auckland, historically the least affordable region, affordability has significantly improved. Lower quartile mortgage payments in Auckland now account for 41% of first-home buyer income, nearing the 40% affordability threshold. Certain Auckland areas, including Waitakere, Manukau, Papakura, and Franklin, are already within affordable territory.
However, challenges remain for aspiring first-home buyers, particularly accumulating a deposit. A 10% deposit on a home at the national lower quartile price requires $58,000, while a 10% deposit in Auckland requires $74,800. A 20% deposit, which avoids low-equity fees, would double these amounts. The REINZ reported that national home sales experienced a slowdown, dropping 8.9% month-on-month and 0.6% lower than in January 2025, while new listings increased by 1.3% and the total stock of properties for sale was up 2.3%.
REINZ Chief Executive Lizzy Ryley noted that interpreting housing market trends over the summer months can be challenging, as activity between November and February often reflects seasonal patterns. “Once seasonal trends are taken into account, the data shows the January market held up well,” she said.
