Australia's Rental Crisis Linked to High Population Growth and Housing Shortages

Australia's Rental Market: The Immigration Factor

Economist Gerard Minack has identified population growth via immigration as a primary factor contributing to Australia's ongoing rental crisis.

Following the reopening of Australia's international border in late 2021, net overseas migration significantly increased, with approximately 1.5 million net migrants arriving between Q4 2021 and Q2 2025. This substantial influx of new residents resulted in increased rental demand and higher advertised rents, subsequently contributing to an elevated cost of living for tenant households.

The Deepening Rental Crisis in Australia

According to data from Cotality, nationally advertised rents have surged by 31% since the end of 2021, adding an estimated $8,500 to the annual cost for the median tenant. With rental vacancy rates near historical lows, annual advertised rental growth has reached 5.5%.

This reacceleration in advertised rents suggests that rental affordability in Australia, already at a record low, may continue to worsen.

The slow pace of housing construction in Australia further complicates the situation. This rate is anticipated to decline even more following the Reserve Bank's initiation of another tightening cycle.

Policy Considerations for Stabilization

For the rental market to stabilize, it is suggested that the federal government would need to adjust immigration levels to fall below the nation's construction capacity.

International Comparisons: Lessons from Canada and New Zealand

Canada and New Zealand have recently undertaken measures to reduce net overseas migration and population growth, yielding instructive outcomes for their respective rental markets.

Canada has recorded 15 consecutive months of declining annual asking rents, leading to a reduction of approximately 6.5% from its mid-2024 peak.

As a result, Canadian rents are now at their lowest level in 30 months, with the average tenant spending $142 less per month ($1,704 per year) compared to the peak in mid-2024.

New Zealand also experienced a decline in rents in 2025, as reported by Realestate.co.nz and Trade Me. In January, Realestate.co.nz observed a 10-year high in rental listings, increasing by 12.8% year-over-year to 7,224 properties.

Justin Fabo at Antipodean Macro indicates that median rents in newly lodged rental bonds are declining, and the growth in CPI rents (stock) is decreasing. New Zealand's housing supply is improving due to population growth falling below the rate of dwelling construction.

These positive shifts in both Canada and New Zealand underscore the potential impact of aligning population growth with housing capacity.

These international examples suggest that reducing immigration could be a strategic policy to allow Australia's housing supply to align with demand and improve rental affordability.