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In the country of the Houyhnhnms, Gulliver meets the species that is the most skeptical of him-and for good reason. Gulliver must do everything he can to separate himself from the Yahoos, a very different situation from his distinct positions in Lilliput and Brobdingnag. In order to accomplish this, Gulliver does small things daily like using his best manners, eating with a knife and fork, keeping his clothes on, and being as clean as possible. He shows that he can use language, can reason well, and can be prudent and mannerly.
It is interesting to note that from the very beginning of his time in the country of the Houyhnhnms, Gulliver strives to separate himself from his own species. Is this what Swift has been trying to do his entire life? It often is difficult to strive for individual human greatness among a mass of people who hardly try and have hardly any notion of what greatness would be. In Brobdingnag, when Gulliver explained the English people and their way of life to the king, the king decided they were lowly creatures and Gulliver became offended, trying to defend his people. Something is different now in the country of the Houyhnhnms. When the grey mare tells Gulliver that he thinks his people are worse than the Yahoos, Gulliver is quick to agree.
What is different here? Only Gulliver's experiences since Brobdingnag and his contact with the Yahoos. Through the Yahoos, Gulliver has come to see some awful aspects of human nature, and Swift has shown his readers what they would be (and often are) without the intelligence and graces of which they are capable. Gulliver seems willing to turn his back on the English people in favor of those he deems better than the English. Now that he has been exposed to many alternatives, he can think carefully about who to admire and what political systems to favor, and the English certainly come up short in relation to the Houyhnhnms.
Gulliver describes the Houyhnhnms as well spoken, organised, clean, serene, peaceful, and innocent. They do not lie, they're free from temptation, they are just, and they live by simple laws. He defines the word Houyhnhnms, as "perfection of nature". The Houyhnhnms are set up as an ironic role for mankind. Of all the races Gulliver encounters, these are the least humanoid. They are, however, endowed with the virtues of kindness, gentleness, honesty, honour and loyalty offcource. I think wisdom as well. Of all the races, they are the least violent, acquisitive, dangerous or deceitful. The point Swift is making that humanity is rotten- to see how life should really be lived, and how we should look to an another creature, ideally one as gentle, noble and useful as a horse.
From memory, the other qualities he points to as admirable are:
Simple love life.
Close knit family life.