Australia Rents Rise 2.5 Times Faster Than Wages in Affordability Crisis
Synopsis
Australian rent affordability is at an all-time low, a new report from property data firm Cordiality has found. Rents around the country have soared by almost 44 per cent over the last five years, more than twice as fast as wage growth. As the average renter now hands over a third of their pre-tax income to the landlord, experts are warning that Australians are falling into a “rental trap” and many can barely afford to save for a property or cost of living expenses.
SYDNEY — Australian renters are now enduring the most financially stressful period in history as the gulf between housing costs and pay packets widens to breaking point. A new analysis out Wednesday from data firm Cotality reveals that national rents have increased 2.5 times faster than wages over the last five years.
The data reveal a harsh fact for millions of households: despite a 17.5% increase in wages since 2020, rents soared upward by 43.9%. This huge imbalance has brought rental affordability to the worst level on record, with the typical renter now forking out 33.4% of their pre-tax income every month just to cover rent. Is Australia’s “Great Rental Squeeze” becoming a permanent feature of the economic landscape?
Goodbye “30 Per Cent Rule”
For decades, financial experts have said that spending more than 30% of your income on housing is an indicator that you’re under rental stress. That rule has now been broken. The current average is well above the long-term average of 29.2%. Five years ago, at the peak of the pandemic, renters were paying closer to 26% of their income for housing.
“The relatively tight market conditions and sluggish pace of new construction have tipped the market into a phase where rents are clearly driving the housing value proposition,” said Tim Lawless, research director at Cotality. For many families, he said, that increasingly has meant “far fewer options” regarding where they live and needing to move further away from work or schools in order to find anything they can afford.
Western Australia: Ground Zero For The Rents Crisis
Although the battle is a national one, there is no greater pressure point than Western Australia. Rents in the state are up a jaw-dropping 66% over five years. Despite some of the biggest wage growth in the country at 18.5%, it hasn’t begun to keep pace with an explosion in housing costs.
The ACT was the only major market to buck that trend. In Canberra, rents increased 18.5% as wages grew 17.8%, the only part of Australia where pay and housing costs roughly kept pace. What has also helped the ACT, experts say, is a “building boom” that has ensured new homes being built are more in line with actual demand.
Rent Trap Is Fueled by Supply Shortage
The rest of 2026 looks challenging. After a rare pause last year, rental prices are once again on the move, increasing at an annual pace of 5.4 per cent as of January. And this is occurring simply because there is not enough housing for a population that keeps expanding.
Australia will be 260,000 houses short of building targets by 2029, according to a recent federal report. Vacancy rates are at historic lows, and with tenants having few other places to go, landlords can keep raising prices. And it’s not just home loan customers and providers, the people who are themselves paying rent are suffering, as well-inflation is high and options for their future are slim.
What Needs to Change?
Economists caution that the situation will not get better unless there’s a “step-change” in the number of homes being built. Some of the ways to solve the crisis include granting tax incentives to companies that construct large apartment blocks for long-term rent. Amending local laws to permit more townhouses and apartments in locations close to trains and jobs. And additional funding in social and affordable housing to relieve the pressure on the private market.
The gap for now will continue to widen between what Australians earn and what they pay in rent. Short of a flood of new homes to the market, the “rental trap” is likely to remain a significant obstacle for an entire generation.
Key Highlights
- Rents have increased 2.5 times as quickly as wages since 2020.
- Renters are now putting an average of 33.4 per cent of their income toward housing, the highest it’s ever been.
- Western Australia experienced the largest surge with rents up 66 per cent in five years.
- Australia is expected to be 260,000 homes short of its 2029 housing goal.
- The RBA cash rate is now 3.85%, putting even more weight on an already struggling economy.
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