Bernard Hickey blogs at the excellent interest.co.nz on home affordability:
Plunging mortgage rates and another fall in house prices improved home loan affordability by a record amount in December to its best level in 4 years, the monthly Home Loan Affordability report from www.interest.co.nz shows. At current rates of improvement, housing is likely to be broadly affordable again for most home buyers towards the end of 2009.
In other words, back to sanity.
You can see the impact of both the fall in prices and of interest rates. And both should continue to fall. The tax cuts in October and again in APril will help also as they boost take-home pay.
40% is generally regarded as the maximum home owners should pay towards their accommodation. That’s probably unrealistic for many, but it would be good t get it below 50% anyway.