Falling interest rates improved housing affordability in July in every area of New Zealand except Central Otago Lakes, which remains by far the most unaffordable place to buy a home.
Wizard Home Loans director John Grant said housing affordability in New Zealand was at its best level since February 2007.
Tax cuts on October 1, and further falls in interest rates, were expected to improve affordability significantly during the rest of 2008 and through the spring, when many home sellers put their houses on the market.
The monthly report measures the proportion of a median after tax income needed in each part of New Zealand to service an 80% mortgage on the median house price in that region.
It took 77.4% of the median take-home pay to service the mortgage on the median house in July, down from 78.3% in June.
However, a household that bought Central Otago Lake's median priced house in July at $565,000, needed at least $1851.85 of weekly after-tax income for the mortgage to be "affordable".
A mortgage was affordable if the weekly payments were 40% of weekly take-home pay.
For first-home buyers in Central Otago Lakes, it took 124.7% of one median income to pay the mortgage on a lower quartile-priced home at $407,000.
The median weekly take-home pay for a first-home buyer was $594.17 in July, up from $591.46 in June.
In comparison, it took 116.8% of one median income for 30 to 34-year-olds to pay the mortgage on the lower quartile house price.
First home buyers in Otago also faced harder times trying to buy a house, although affordability for the region as a whole improved slightly to 49.4% from 49.8% in June.
It now takes a first home buyer in Otago 52.7% of one median income to pay the mortgage on a lower quartile-priced house of $187,000.
In comparison, it takes 49.4% of one median income for 30 to 34-year-olds to pay the mortgage on a lower quartile house price.
A household that bought Otago's median house price in July needed at least $782.48 of weekly after-tax income for the mortgage to be affordable.
Mr Grant said home buyers were in a much stronger position than they had been for a long time.
"It is a buyer's market and falling interest rates, rising wages and lower tax rates are all working in favour of home buyers as we head back into summer."
In a note of caution, Mr Grant said most home buyers were still forced to pool around two median incomes to afford the mortgage of a median house.
