The improvement came as the national median house price fell 2.9 percent in August and the average two-year fixed mortgage rate fell 13 basis points to 8.96 percent, adding to the benefits from a slight increase in disposable income because of wages growth.
The monthly Wizard Home Loans affordability report measures the proportion of a single median after tax income needed in each part of New Zealand to service an 80 percent mortgage on the median house price.
It shows 74.2 percent of the median take-home pay was needed to service the mortgage on the median house in August, down from 77.4 percent in July.
That 3.2 percent improvement was more than double the previous record improvements of 1.5 percent each in May and June of this year.
Affordability was now at its best level since January 2007, but remained well above the 40-50 percent levels seen in 2002, 2003 and 2004 before house prices took off, interest.co.nz, which puts together the report, said.
Every region reported improvements in housing affordability except Southland, where house prices bounced in August. Despite that, Southland's affordability at 46.7 percent remained the best in the country.
Although house prices fell 17.7 percent in August in the central Otago lakes area of Queenstown and Wanaka, that area remained the least affordable at 112.9 percent.
For first time home owners buying a cheaper house, the affordability ratio improved to 59.3 percent in August from 61.1 percent in July, and was also back at its best levels since January 2007.
Wizard Home Loans New Zealand business director John Grant said tax cuts due on October 1 and the lower prices being offered in the housing market were likely to further improve affordability through the rest of this year.
Today's report showed that most home-buyers are still forced to pool almost two median incomes to afford the mortgage on the median house, although that multiple has dropped from 2.1 in November last year to 1.85 in August.
