Rents Rising 6% Nationally as Rental Supply Keeps Shrinking

National rents are growing faster than wages and inflation as investment exits and construction hits 12-year lows — here's what renters and buyers need to know.

National Rents Growing Well Ahead of Wages

Australia's rental market is tightening across every capital city, with national rents growing at approximately 6% annually, according to Property Update. That rate comfortably outpaces both headline inflation running at 5.4% and wage growth of 3.6%, meaning the average renter's real income is falling relative to housing costs every single month.

The pressure is sharpest in Perth, Hobart, and Darwin, where rents are rising 8–10% annually. Brisbane is up 6.4%, Sydney around 6%, while Melbourne is tracking at near 5%. For renters approaching a lease renewal, these figures represent a structural shift — not a short-term spike that will correct on its own.

Energy and utility costs are compounding the squeeze. Electricity is up 20% over the last 12 months, with gas, fuel, and water also rising. For households where both rent and essential utilities are climbing, the room for budgetary manoeuvre is shrinking from multiple directions at once.

Why Supply Is Falling

The immediate driver of rising rents is a shrinking supply of available rental properties. Investment properties are leaving the market faster than new ones are entering it.

In Melbourne, 640 rental homes were removed from the rental pool in May alone, representing over 1,000 bedrooms no longer available to tenants. Brisbane saw a net loss of over 330 properties. In Sydney, 3,744 bedrooms were sold out of the rental market compared with 2,159 added — a net outflow in an already constrained city.

New home construction has simultaneously hit 12-year lows. Under recent federal budget tax reforms, Property Update estimates approximately 35,000 fewer homes will be built each year than under the previous settings. The budget wound back negative gearing on established properties purchased after budget night, which broker network data confirms is driving a significant investor pullback from purchase decisions. Investor mortgage lodgements nationally are down 35% by value since February, with lodgements for existing properties — now excluded from the concession — down 40%.

Regional housing markets are under particular strain. Research from the Council of Small Business Organisations Australia, based on a survey of 572 regional small business owners, found more than half rate housing access in their local area as poor, with just 7% rating it as good. Around one in three regional businesses have raised wages specifically to help staff cover housing costs — a sign the shortage has moved beyond individual hardship to become a business viability problem.

The Case for Buying: Competition Has Softened

For renters considering a purchase, there is a less obvious counterpoint in the current data. With investors and first home buyers pulling back from the market, buyer competition has fallen meaningfully. Cotality data shows the weighted auction clearance rate across combined capital cities sat at 45.3% for the week ending 19 July, compared with 69.4% for the same week in 2025. Properties that would have sold strongly at auction 12 months ago are now more often reaching negotiation.

That softening does not make buying straightforward. Three RBA cash rate increases since February have cut borrowing capacity, and economists are split on whether a fourth follows at the August 11 meeting. Average national house prices now sit above a million dollars. The affordability equation requires careful modelling before committing.

What the data does suggest is that the cost of staying in rental accommodation is rising structurally, not cyclically. If rents are growing at 6% annually and wages at 3.6%, each year in the rental market widens the gap between where you are and where ownership begins.

Our first home buyer hub walks through the full purchasing process, from pre-approval to settlement, including what lender policies look like in a rate-uncertain environment.

Running the Numbers on Your Situation

Whether buying makes sense starts with understanding your borrowing capacity at current rates — and how that changes under different RBA scenarios. Use our borrowing power calculator to model your position before you speak to a lender.

If you already own an investment property, rising rents may have improved the cashflow picture despite higher mortgage costs. Compare the latest investor home loan rates to see whether refinancing to a sharper rate would further improve your position.

For owner-occupiers and renters alike, a housing market where rental costs are growing faster than wages is a signal worth acting on — even if acting right now simply means getting your numbers clear.

Property Update, "The Rental Crisis That Will Divide Our Country: Why the Middle Class is Under Siege"