Rental households continue to face worsening affordability conditions as rents climb across a large proportion of the property market and the number of available rental homes remains constrained. While the pace of property price growth may be moderating, the rental sector is moving in a different direction. Recent REA Group figures show asking rents rising across both house and unit markets, adding another significant expense to household budgets already affected by higher everyday living costs.
The scale of the increases is evident in the proportion of suburbs recording higher rents. During the three months to July, rents increased in 57.6% of suburbs analysed by REA Group. Unit markets experienced even broader growth, with rents rising in 61% of suburbs. These figures indicate that rental inflation is not restricted to a small collection of high-demand neighbourhoods but is affecting tenants across a wide geographical range.
Melbourne provides a clear example of how these percentage movements translate into actual household costs. REA Group data shows that 150 unit markets and 176 house markets in Melbourne recorded rent increases equivalent to at least $1,000 per year. For tenants, an additional four-figure annual housing expense can materially affect discretionary spending, particularly when electricity, groceries, insurance, transport and other essential costs have also risen.
Conditions are particularly widespread in Queensland. Of the house and unit markets analysed, 95.6% recorded rent increases during the past 12 months. In some locations, rents have risen by as much as $150 per week. At that upper level, a tenant could face an additional $7,800 in rent over a full year, demonstrating how rapidly rental increases can reshape a household budget.
REA Group economist Anne Flaherty says wage growth is generally failing to match the pace of rental increases. That imbalance is central to the affordability challenge. A household may be able to manage a modest rent rise when income is increasing at a similar rate, but the situation becomes significantly more difficult when housing costs rise much faster than wages.
Flaherty also points to the importance of examining rent increases in dollar terms rather than focusing exclusively on percentages. A percentage movement can appear relatively modest when considered in isolation, yet the actual amount a household must find each week or year can be substantial. The pressure becomes even more significant when higher rent is combined with increases in the cost of other necessities.
For tenants, the consequences can extend well beyond housing expenditure. Higher rents may force households to reduce spending on entertainment, travel, savings or major purchases. More financially stretched renters may have to make compromises involving the location, size or quality of the property they occupy. Others may choose to share accommodation, remain in family homes for longer or relocate to more affordable areas.
Limited rental availability adds another layer of difficulty. When fewer homes are advertised for rent, tenants have less negotiating power and may face greater competition for individual properties. Strong competition can make it easier for asking rents to increase because households have fewer alternatives. It can also make relocation more challenging, meaning renters experiencing a substantial increase may find that comparable properties elsewhere offer little financial relief.
Investors and housing providers are also operating in an environment of changing costs. Interest rates, insurance, maintenance expenses, council charges and taxation can influence the cost of owning rental property. However, regardless of the reasons behind individual rent movements, the affordability impact ultimately falls on tenants who must allocate a larger proportion of their income to securing accommodation.
The widespread nature of the increases also has implications for policymakers. Expanding rental supply requires sufficient construction of new homes, continued investment in rental properties and development settings that allow additional housing to reach the market. Measures designed to address affordability therefore need to consider both immediate household pressures and the longer-term challenge of increasing the number of available dwellings.
The three months to July demonstrate how persistent the problem has become. With rents increasing in 57.6% of suburbs and unit rents rising in 61%, rental inflation remains a broad market issue. Melbourne tenants are experiencing annual increases of at least $1,000 across hundreds of house and unit markets, while almost all Queensland markets analysed recorded annual growth.
Queensland’s figures are especially striking because 95.6% of the markets examined experienced increases over the previous year, with some rents climbing by up to $150 a week. When combined with wage growth that often fails to keep pace, such increases reinforce the financial strain confronting renters.
Until rental supply improves sufficiently to give tenants greater choice, affordability pressures are likely to remain a central housing issue. Slower property price growth does not automatically translate into improved conditions for renters. For many households, the more immediate challenge is finding an available property and meeting a rent that is rising faster than their income.
