Independent economist Gerrard Minack recently posted the following chart illustrating how Australia’s rental inflation has tracked population growth:
CBA’s latest housing market update notes that “there is a particularly strong relationship between increases in higher-density housing supply and rent growth”:
“This likely reflects the fact that apartments make up a disproportionate share of the rental market: just over60% of apartments are renter-occupied, compared with around 20% of detached houses”.
You will note that the above chart from CBA measures the “ratio of population change to higher-density dwelling completions”. Thus the numerator of the formula is directly determined by the level of immigration, which ergo drives rental growth.
In other words, basic supply and demand. When population growth (immigration) increases, so too do rents and vice versa.
Given that overseas migrants need housing as soon as they arrive and almost always rent first, increasing immigration necessarily means upward pressure on rents, which is exactly what Australia has experienced recently.
Interestingly, CBA economist Trent Saunders (a former economist at the Grattan Institute and Domain) presented the data as a supply problem, completely ignoring demand.
However, Alex Joiner, chief economist at IFM Investors, quickly set Saunders straight:
“Yes supply needs to be increased that’s the denominator, it’s slow moving and faces headwinds from far too much bureaucracy, high costs and now higher interest rates”, wrote Joiner on Twitter (X).
“But there’s the numerator, demand in the form of population growth – if the pandemic showed us anything, you can move that quite quickly should you desire to do so”.
This is the crux of the issue. Because the federal government has run a historically strong immigration program, rental demand has soared, vacancy rates and listings have collapsed, and rents have soared.
According to Cotality, nationally advertised rents have soared by 47% since the end of 2019, adding nearly $11,500 to the annual cost of renting for the median tenant:
As a result, rental affordability in Australia is now tracking at an all-time low, with the median tenant household sacrificing a record share of their income to meet rent payments:
The medium-term outlook is concerning, with the federal government’s National Housing Supply and Affordability Council (NHSAC) forecasting that population demand will run ahead of new housing supply every year to at least 2028-29:
KPMG’s latest annual housing report also projected a worsening shortage of housing, with population demand continuing to outrun supply:
Australian tenants shouldn’t have to suffer:
Canada experienced a record immigration influx following the COVID-19 pandemic, which sent rental growth soaring:
Chart from February 2024 (from National Bank of Canada)
The difference is that the Canadian government in 2024 implemented significant cuts to both temporary and permanent migration.
As a result, population growth in Canada has plummeted and even ran negative (-76,000) in the third quarter of 2025:
Chart from the National Bank of Canada
Canada’s rental affordability has improved significantly following the cuts to immigration.
According to Rentals.ca, the average asking rent in Canada has fallen for 17 consecutive months to a 33-month low, down 7.8% from its May 2024 peak:
The typical Canadian tenant household is now paying $172 less each month on rent, saving them $2,064 per year:
Unlike in Australia, rental affordability in Canada is rapidly improving. The average rent in February accounted for 29% of average renter household income, down from 31% a year ago and 34% two years ago, and below the standard 30% affordability benchmark, according to Rentals.ca:
The reality is that Australia is experiencing its worst rental crisis in modern history, driven by a record surge in immigration post-pandemic.
The only realistic solution to Australia’s rental crisis is for our policymakers to emulate Canada and restrict immigration to a level that is well below the nation’s capacity to build housing and infrastructure.
