Rents massively outpacing wages as rental crisis deepens
Rents have surged nearly 44 per cent in five years, at almost triple the pace of wage rises, highlighting the growing affordability strain as vacancy rates remain historically tight.
Australia’s rental market is showing little sign of meaningful relief, with rents rising far faster than wages over the past five years and vacancy rates remaining stubbornly low across most of the country.
New analysis from property research firm Cotality shows national rents have jumped 43.9 per cent over the five years to September 2025, compared with a 17.5 per cent rise in wages over the same period.
The widening gap highlights the growing strain on tenants as housing costs absorb a larger share of household incomes.
“For many households, that means a lot less flexibility in the budget, and far fewer options about where and how they live,” said Tim Lawless, Research Director at Cotality.
The divergence represents a sharp shift from the years before the pandemic, when income growth generally kept pace with rental increases.
“Before the pandemic, renters in many parts of Australia were seeing wages grow a little ahead of rents, or at least keep pace,” Mr Lawless said.
“Since 2020, a combination of tight vacancy rates, smaller household sizes and sluggish new housing supply has pushed the market into a very different phase, one where rents are clearly in the driver’s seat.”
Vacancy rates tight despite modest improvement
While rental availability has improved slightly in recent months, conditions remain tight by historical standards.
The national rental vacancy rate rose to around 1.5–1.7 per cent in January, depending on the dataset, up from recent record lows but still well below the long-term average of about 2.5 per cent.
According to REA Group’s latest rental market analysis, vacancy rates have increased modestly across both capital cities and regional markets, hitting its the highest national level since early 2022.
However, Anne Flaherty, Senior Economist, REA Group, said the improvement does not yet represent a meaningful shift for renters.
“Conditions for renters have improved over the past three months, though they remain largely unchanged from a year ago,” Ms Flaherty said.
“They are significantly below the conditions renters faced during the pandemic five years ago when the national vacancy rate was sitting at 2.3 per cent.”
Despite the slight easing, vacancy levels remain extremely tight in several cities.
Hobart currently has the lowest vacancy rate in the country, with just 0.72 per cent of rental properties available, while Perth and Brisbane also remain constrained, with vacancy rates near 1.1 per cent.
“While the pace of rent growth has slowed across most markets over the past year, continued low vacancy rates are expected to drive rents to new highs in 2026, particularly in markets where supply is constrained,” Ms Flaherty said.
Rental growth begins to reaccelerate
After a brief period of moderation through 2024 and early 2025, rental growth is again gathering momentum.
Cotality’s national rental index rose 0.6 per cent in January, marking the strongest monthly increase since April last year.
Over the 12 months to January, rents climbed 5.4 per cent nationally, adding about $35 per week to the median rental cost.
The increase follows several years of extraordinary growth in the cost of renting.
Over the past five years, weekly rents have increased by more than $200 on average nationally, representing one of the most rapid rental escalations on record.
As a result, affordability has deteriorated significantly.
Cotality estimates the average rental household is now spending 33.4 per cent of its pre-tax income on rent, the highest level recorded and well above the decade average of about 29 per cent.
“The fact that rental growth is reaccelerating, even after such a large cumulative increase since 2020, is a real concern,” Mr Lawless said.
“It suggests demand for rental accommodation still far exceeds available supply, and that renters are facing an even larger portion of their income just to keep a roof over their heads.”
Western Australia leading rental pressure
The rental squeeze has not been evenly distributed across the country.
Western Australia has recorded the most dramatic rental increases, with rents climbing 66 per cent over the past five years, far outpacing the state’s 18.5 per cent growth in wages.
“Nowhere is the pressure more evident than in Western Australia, where rents have climbed by around two thirds in just five years,” Mr Lawless said.
Even in markets where vacancy rates have improved slightly, underlying demand remains strong due to population growth, tight housing supply and limited new construction.
Supply remains the critical factor
Both analysts agree that the outlook for renters will largely depend on how quickly new housing supply can reach the market.
With vacancy rates still historically low and new housing completions struggling to keep pace with population growth, relief may take time.
“Unless wage growth accelerates meaningfully, or we see a step change in rental supply, the risk is that affordability will deteriorate further for lower-income households in particular,” Mr Lawless said.
Ms Flaherty also noted that while rental availability has improved slightly in some regions, many markets remain structurally undersupplied.
For tenants across much of Australia, the result is a rental market that remains highly competitive and increasingly expensive.
