Rents in Australian capital cities are rising at their slowest pace on record.

While Sydney and Hobart were the cities that posted the strongest rent rises in the year to May 31, steep falls in Darwin and Perth kept a lid on the national average.

The latest CoreLogic RP Data rental index shows that average capital city rents rose 1.5 per cent to $488 a week, the weakest rise on record.

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“The sluggish pace of rental appreciation can likely be attributed to the ongoing boom in dwelling construction across Australia’s capital cities accompanied by record high participation in the housing market from investors,” the report said.

“Most of the new capital city housing stock is units and this type of stock is much more likely to be owned by investors providing additional rental options across the capital cities.”

Sydney was the most expensive place to rent a home, with rents rising 3.1 per cent to $595 a week.

And while Hobart posted the strongest annual rise in rents, it remains the cheapest city for tenants at $342 a week.

The report also found that with city rents increasing at their slowest pace and home values falling, gross rental yields for landlords had decreased.

Yields for rental houses fell to 3.6 per cent in May from 3.9 per cent a year earlier, marking their lowest level since late 2010.

For units, yields fell to 4.6 per cent from 4.7 per cent.

RENTS

* Hobart, up 3.2 pct in the year to May 31 to $342/wk

* Sydney, up 3.1 pct to $595

* Melbourne, up 2.3 pct to $446

* Brisbane, up 2.0 pct to $435

* Adelaide, up 1.2 pct to $369

* Canberra, down 0.6 pct to $500

* Perth, down 4.5 pct to $477

* Darwin, down 5.5 pct to $567

* Combined capitals, up 1.5 per cent to $488

(Source: RP Data)