Surging rents send rental affordability to new lows

New research from REA Group’s data analysis business shows rental affordability in Australia is now at its worst level since at least 2008, when the company began keeping records.

PropTrack says the significant increases in rents over the past four years have driven worsening affordability for tenants. 

However, the company’s latest Rental Affordability Report highlights significant differences between the states, with renters in New South Wales and South Australia facing particularly tough conditions, while conditions in Victoria have eased.

The details

The PropTrack Rental Affordability Index shows that between July and December 2024,  households across the income distribution could afford to rent the smallest share of advertised rentals since REA Group began keeping records in 2008.

“Australian renters are facing the toughest conditions in at least 18 years,” says PropTrack Senior Economist and report author, Angus Moore. 

For example, households with a median income of $116,000 could afford just 36% of rentals advertised during the July to December period, a new low.

To calculate its index, PropTrack looks at the share of properties advertised as available to rent on REA Group’s realestate.com.au platform that households at each percentile of the income distribution could afford to rent.

A measure of 1.00 means all households can afford to rent homes in proportion to their income.

“Rental affordability” is defined as a household spending 25% or less of their pre-tax income on housing.

So that ‘typical’ or median-income household, earning $116,000 a year, could spend up to $555 per week on rent and fall under the 25% threshold. 

PropTrack says just 36% of rentals across Australia were advertised for less than this amount.

“The current alarming state of rental affordability is a substantial deterioration from conditions before and during the pandemic,” Angus Moore says.

“The key reason for deteriorating rental affordability is, unsurprisingly, surging rents.

“Rents nationally are up 48% since pre-pandemic, while typical household incomes have only increased 19% in the same period.”

Not an even picture

PropTrack says households in New South Wales and South Australia are facing the toughest rental affordability across the country, with median-income households only able to afford 26% and 20% of rentals, respectively.

Other states are only marginally more affordable, with the notable exception of Victoria.

Only 8 years ago, Victoria had the dubious distinction of being the second-least affordable state for renters.

“This change in relative affordability reflects that rents in Melbourne haven’t grown nearly as quickly as other parts of the country since 2020,” says Angus Moore.

“With median advertised rents sitting at $570 per week at the end of 2024, it is the second-cheapest city to rent, despite its relatively high incomes.

“And while Melbourne rents are 32% higher than March 2020, this is far below the 48% growth recorded nationally.” 

Situation dire for low-income households

“For lower-income households, renting is essentially impossible,” PropTrack’s Angus Moore declares.  

His report shows that lower-income households earning $70,000 per year – at the 30th percentile of income distribution – can afford just 2% of advertised rentals if they spend up to 25% of their pre-tax income on housing.

Angus Moore estimates that households earning less than $64,000 per year – which represents around one-third of all renter households – would need to spend a whopping 40% of their pre-tax income to afford their rent, “making leasing extremely challenging.”

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The situation for low-income renters is so bad because, in recent years, rents have grown more quickly at the “affordable end” of the market.

PropTrack says the affordable rental properties have seen faster growth in rents (+54%) than those at the most expensive end of the market (+38%).

“This highlights just how crucial Commonwealth Rent Assistance and community housing is for lower-income Australian households,” Mr Moore says.

Rent growth still strong, but slowing

While rents grew at a slower rate in 2024 than in 2023, they still outstripped income growth.

PropTrack says the previous low-point in rental affordability it measured came in 2009-10, because of slow income growth after the Global Financial Crisis. 

In the decade that followed, rental affordability gradually improved as rents increased at a slower pace than incomes, reaching a high point nationally in 2020-21. 

This was in the initial stages of the pandemic, when rents temporarily decreased in Sydney and Melbourne – the country’s two largest rental markets.

While affordability is now currently at its worst level on record, PropTrack’s Angus Moore says rental market conditions are showing signs of easing. 

“The silver lining for renters is that conditions appear to be improving.

“Rental availability, while still limited, is starting to increase and the pace of rent growth is slowing.

“While rents are still likely to grow this year, we expect the pace of growth will continue to moderate,” he says.