Rents Rising 3x Faster Than Wages — Is It Time to Buy?

Australia's rental market has reached a breaking point. Over the past five years, national rents have climbed 43.9% while wages have grown just 17.5% — a gap of more than two and a half times. Renters are now spending a record 33.4% of their pre-tax income on rent, well above the 30% threshold traditionally considered the limit of affordability. With vacancy rates sitting at just 1.2% nationally and no relief in sight, a growing number of renters are asking a question that would have seemed counterintuitive a few years ago: is buying actually cheaper?

The Numbers: How Far Rents Have Outpaced Wages

Analysis by savings.com.au found that national rents have risen 43.9% over the five years to late 2025, compared with 17.5% growth in the Wage Price Index over the same period. That means rents have increased roughly 2.5 times faster than wages — and the gap is widening.

The median weekly rent across combined capital cities now sits at $702, according to CoreLogic/Cotality data. For a household to spend no more than 30% of pre-tax income on rent — the standard affordability benchmark — they would need to earn approximately $112,667 per year. That's up from around $74,533 five years ago, a 51% jump in the income required just to rent comfortably.

The situation is particularly stark for single-income households. A single person earning the national median salary of around $70,000 would need to spend roughly 52% of their pre-tax income to rent in Sydney — far beyond any definition of affordable.

Where the Squeeze Is Worst

While rents have risen sharply across the board, the pain is not evenly distributed. Western Australia has experienced the most extreme growth, with rents surging 66% over five years. South Australia and Queensland are also well above the national average.

The ACT stands out as the only market where rent and wage growth have been broadly aligned. Everywhere else, renters are falling further behind each year. In Perth, a renter who was paying $400/week five years ago is now paying around $664/week — an extra $264/week, or more than $13,700 a year, that has to come from somewhere.

Vacancy Rates: Why Relief Isn't Coming Soon

The fundamental driver of the rental crisis is simple supply and demand. Australia's national vacancy rate sits at just 1.2%, according to SQM Research — well below the 2.5-3% level generally considered balanced. In some capital cities, the situation is even tighter.

Until housing supply catches up with population growth — which most analysts don't expect for several years — vacancy rates are likely to remain tight and rents will continue to rise faster than wages. This makes the rent-vs-buy calculation increasingly relevant for anyone who can access a deposit.

When Buying Is Actually Cheaper Than Renting

Perhaps the most striking development in the current market is how many suburbs have crossed the tipping point where monthly mortgage repayments are now lower than monthly rent. Analysis by propertyupdate.com.au and Domain found hundreds of suburbs across the country where this is the case.

These calculations typically assume a 20% deposit with current variable mortgage rates. Even with a smaller deposit and Lenders Mortgage Insurance (LMI), the gap between renting and buying has narrowed significantly in many areas. In parts of Perth and regional Queensland, buying an apartment or townhouse can be $100-200/week cheaper than renting the equivalent property.

The typical break-even point for buying versus renting — accounting for stamp duty, LMI, maintenance, and opportunity cost of the deposit — is around 7 years. If you plan to stay in a property for longer than that, buying is generally the better financial decision, especially in a market where rents are rising 3x faster than wages.

What This Means for You

If you're currently renting and feeling the squeeze, there are several practical steps worth considering:

• Run the numbers for your situation: Use our Rent vs Buy Calculator to compare the true cost of renting versus buying in your area, factoring in all costs including stamp duty, maintenance, and potential capital growth
• Check your borrowing power: Many renters are surprised to find they could qualify for a mortgage with lower repayments than their current rent — especially with government schemes like the First Home Guarantee (5% deposit, no LMI)
• Consider apartments and townhouses: In many markets, units are significantly more affordable than houses and more likely to be cheaper than renting. Melbourne units in particular offer strong value right now
• Look at government schemes: Between the First Home Guarantee, Help to Buy, First Home Super Saver Scheme, and state grants, first home buyers have more support than ever
• Don't wait for rents to fall: With vacancy rates at 1.2% and construction well below target, rents are more likely to keep rising than to ease significantly

The Bottom Line

The rent-versus-buy equation has shifted dramatically. Five years ago, renting was comfortably cheaper than buying in most Australian cities. Today, rents have risen so far and so fast that mortgage repayments are actually lower than rent in hundreds of suburbs — and the gap between rent growth and wage growth shows no sign of closing.

This doesn't mean everyone should rush to buy. You still need a deposit, stable income, and the intention to stay for at least 5-7 years. But if you're spending more than 30% of your income on rent and watching it climb every year, it's worth running the numbers. The answer might surprise you.

Sources: savings.com.au; CoreLogic/Cotality; SQM Research; SBS News; Domain; propertyupdate.com.au; ABS Wage Price Index