‘Keeps me up at night’: rental rupture laid bare

THE typical Australian renter is spending a record share of income to keep a roof over their head as younger generations find themselves squeezed between rising rents and falling wages.

Annual growth in rental prices accelerated to 5.9 per cent in the June quarter, up from a low of 3.4 per cent in mid-2025, according to a report by data firm Cotality released on Thursday.

Meanwhile, real income growth has stalled because of high inflation and low productivity growth.

Persistent inflation has caused Australians’ real wages to decline 5.1 per cent since March 2021 – one of the steepest falls among developed economies – the Organisation for Economic Co-operation and Development revealed in its annual employment outlook.

With rents rising and real wages falling, one-third of Australians renting were caught in a “wages-rent squeeze”, Greens senator Barbara Pocock said.

“Certainly, numbers of incomes going backwards and rents going up by that amount are concerning, absolutely,” Productivity Commission chair Danielle Wood told a parliamentary inquiry into housing inequity in Melbourne.

Australians born in the 1990s had the unhappy distinction of being the first generation on record to be no better off than the one that preceded them, according to research by the commission.

“It’s certainly one of the figures that keeps me up at night,” Ms Wood said.

“We have become accustomed to, and we should want as a nation, that each generation at least on average is better off than the last.

“What we are picking up with that cohort born in the 1990s, they hit the labour market mid-last decade when productivity growth was slowing, wages growth has been pretty stagnant, and so that’s why we haven’t seen that progress.”

Households were devoting about a third of their income to rent, said Cotality head of research Gerard Burg.

“That’s a record high and really speaks to the general pressure,” he said.

Nationally, the median rental climbed to a record $705 a week, even as quarterly growth eased to 1.6 per cent from 2.1 per cent in March.

With households stretched to the limit and affordability constraints limiting how much landlords could increase rents, the market was likely to soften, Mr Burg said.

The median rental in Sydney was $841 a week, and Hobart, the cheapest capital city, had a median rental of $632.

A shortage of available homes has driven rental growth.

Vacancy rates have been stuck at 1.6 per cent for two quarters, and rental listings are down 17 per cent from the five-year average.

For the poorest Australians, the proportion of their incomes devoted to rent has grown even faster than the median renter since the 1980s, Kate Raynor, a fellow at progressive think tank Per Capita, said.

“This is not only a story about age; it is fundamentally a story about income,” she told the housing inequity inquiry.

While boosting affordable housing supply would help tackle the rise in rents, increasing jobseeker and wages for low-income earners was also needed to improve rental affordability, Dr Raynor said.

Changes to negative gearing and the capital gains tax discount, announced in the May budget, have flipped most investor strategies from caring about capital to keeping an eye on yields.

But Mr Burg said blaming the high rent prices – and in turn high yields – solely on the budget was misguided.

The war in the Middle East, the surging cost of living, and supply constraints were also significant factors.

Community Strong Australia MP Allegra Spender said economists agreed changes to investor tax breaks were not the major factor in rising rents.

“But the truth is, we absolutely need to build more homes,” she told Sky News.

While the budget included some useful supply-side measures, such as support for using AI to speed up planning and approval processes, more needed to be done to bring skilled tradespeople into the country, Ms Spender said.