Chronic housing shortage heaps more pain onto renters
Extraordinarily tight rental markets are driving up prices faster than ever, taking a record share of workers’ incomes while increasing cost-of-living pressures.
Housing data group Cotality announced in its quarterly rent review on Wednesday that rents increased by 2.1 percent in the three months to March.
The pace of rent increases has accelerated in recent months.
Rents increased by 1.2 percent in the last three months of 2025 and by 0.9 percent in the quarter before that.
Gerard Burg, head of research at Cotality, said rent affordability had worsened sharply, with five years of sustained growth adding $202 to a typical household’s weekly rent.
Households were spending 33.1 percent of their gross average income on rent, up from 26.2 percent in September 2020.
“Rent growth has slowed for most of 2024 and into mid-2025, but there is a lack of supply to meet demand, putting huge pressure on the rental market,” Mr Burg said.
“Rent growth is likely to remain high until supply meaningfully catches up with demand.”
Vacancy rates have fallen from already low levels over the last 12 months.
There are only 1.6 vacant homes per 100 rents nationally, but some capital is much tighter.
Vacancy rates are at one per cent in Adelaide, which recorded a 2.2 per cent increase in rents this quarter.
Perth experienced the fastest growth in rents – three per cent a quarter – and the second lowest vacancy rate at 1.2 per cent.
“There is little in the available data to suggest conditions are improving,” Mr. Burg said.
“When vacancy rates fall to 1.5 percent or lower, this leaves tenants with little bargaining power and fewer options. This means tenants must consider alternative options such as sharing homes, moving to a new area or moving back in with family.”
He added that without a significant increase in rental supply, any material easing in affordability was unlikely.
Rising rental costs are increasing pressure on households already facing high inflation due to conflict in the Middle East.
The supply shock from the war is also undermining efforts to tackle housing undersupply, increasing the cost of building homes by up to 10 per cent and threatening the feasibility of the project, according to Westpac.
NAB’s head of Australian economics, Gareth Spence, said construction firm insolvencies were already rising in the run-up to the crisis.
“Price levels for things like construction inputs are 30 per cent higher than they were before the pandemic and we know there will be some upward pressure on that going forward,” he told AAP.
Sydney remained the most expensive capital city, with an average rent of $824 per week, while the average rent in Melbourne was $632 per week.
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