Australia’s rental market is under increasing pressure, with rents rising far faster than wages over the past five years. Vacancy rates remain historically low, leaving many households facing significant affordability challenges.
Rents Rising Much Faster Than Wages
Recent analysis shows that national rents have increased nearly 44% over five years, while wages have only grown by 17.5% over the same period. This widening gap highlights the growing financial strain on tenants, as housing costs take up a larger portion of household incomes.
The situation represents a sharp shift from pre-pandemic trends, when income growth generally kept pace with rental increases. Since 2020, tight vacancy rates, smaller household sizes, and sluggish new housing supply have pushed the market into a phase where rents are clearly in the driver’s seat.
Vacancy Rates Remain Historically Tight
Rental availability has improved only slightly, with the national vacancy rate still around 1.5–1.7%, well below the long‑term average of about 2.5%, keeping conditions tight.
Certain cities continue to experience extreme shortages:
- Hobart: 0.72% vacancy rate
- Perth & Brisbane: approximately 1.1% vacancy rate
Low vacancy rates in these markets are expected to continue driving rents upward in 2026, particularly where supply remains limited.
Rental Growth Reaccelerates
After a brief period of moderation, rental growth is gathering momentum again. National rents increased 5.4% over the 12 months to January 2026, adding around $35 per week to the median rental cost. Over the past five years, the average weekly rent has climbed more than $200 nationally — one of the most rapid escalations on record.
As a result, affordability has deteriorated. The average rental household is now spending 33.4% of pre-tax income on rent, well above the decade-long average of 29%.
Regional Differences: Western Australia Leading the Squeeze
Rental pressures are not uniform across Australia. Western Australia has experienced the most dramatic increases, with rents climbing 66% over five years, far outpacing wage growth of 18.5%.
Demand remains strong even where vacancies have eased, driven by population growth, tight supply, and limited new construction.
The Critical Role of Housing Supply
Relief for renters hinges on how quickly new housing comes online. With vacancies still near record lows and construction lagging behind population growth, meaningful easing is likely to be slow. Without stronger wage growth or a substantial lift in rental supply, affordability pressures will continue to intensify, especially for lower‑income households.
Key Takeaways for Investors and Stakeholders
- Rental growth continues to outpace wages, intensifying affordability challenges.
- Vacancy rates remain extremely tight, particularly in Hobart, Perth, and Brisbane.
- Regional variations are significant; Western Australia has seen the steepest increases.
- Supply shortages are the main driver of ongoing rental pressure.
For investors, these trends help pinpoint where rental demand will stay strong, while policymakers remain focused on boosting housing supply to ease affordability pressures and create a more balanced market.