Rents outpace wages as affordability hits record lows

Rents have risen almost three times as fast as wages over the past five years, pushing rental affordability to its weakest level on record, according to Cotality’s latest Chart Pack.

National rents increased 43.9% in the five years to September 2025, compared with wage growth of 17.5% over the same period.

The latest figures reverse the previous five-year period, when wages generally grew at least as quickly as rents in most states and territories.

“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 (pictured right), research director at Cotality.

“Before the pandemic, renters in many parts of Australia were seeing wages grow a little ahead of rents, or at least keep pace. 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.

“Since then, tight rental markets, low vacancy rates and limited new supply have combined to push rents sharply higher while incomes have struggled to keep up.” 

Western Australia and ACT stand out

Western Australia has recorded the strongest rent growth, with rents up 66% over five years against an 18.5% rise in wages.

“Nowhere is the pressure more evident than in Western Australia, where rents have climbed by around two thirds in just five years,” Lawless said. “Even with wages growing a little faster than the national average, they have come nowhere near keeping up with housing costs in that state.”

The Australian Capital Territory is the only market where rent and wage outcomes have been broadly aligned, with rents rising 18.5% and wages 17.8% in the five years to September 2025.

“In the ACT, income growth has managed to track rental growth more closely, which has helped contain the deterioration in affordability compared with other parts of the country,” Lawless noted.

Households devote more income to housing

National rents rose 4.3% over the year to September 2025, outpacing wage growth of 3.4%, and accelerated to 5.4% over the 12 months to January 2026.

 Source: Cotality

“The fact that rental growth is reaccelerating, even after such a large cumulative increase since 2020, is a real concern,” Lawless remarked. “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.”

Cotality’s affordability measures for the September quarter 2025 show renting households now allocate an average of 33.4% of pre-tax income to rent, compared with a decade average of 29.2% and a low of 26.2% in September 2020.

Supply constraints shape the outlook

Lawless said rental conditions were unlikely to improve without a significant increase in housing supply. “With vacancy rates still around record lows in many markets and new housing completions running below what is needed to meet population growth, it is hard to see rents materially easing in the near term,” he added.

“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.”

According to Lawless, policy settings that support more housing delivery, including build to rent projects, incentives for private investment and planning reforms that allow higher density in well located areas, would be important in easing pressure.

“Closing the gap between rent and income growth will require a coordinated effort across governments, industry and investors,” he said. “The sooner we can bring more supply to market, the sooner renters will start to see some relief.”

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