The May CoreLogic RP Data monthly rental review out this week confirms that over the past month, rental rates increased at their slowest pace on record, according to report author Cameron Kusher.
Sydney and Hobart have seen the strongest rental growth over the past year which, according to Mr Kusher, indicates a disconnect between demand and supply.
"Sydney stands out as seeing strong population growth which is creating more demand for accommodation in the city," Mr Kusher said.
Although Sydney and Melbourne recorded low rental yields, Mr Kusher said that investors in these two cities are clearly not targeting rental returns.
"It appears to be purely a capital growth play and likely to remain this way, at least for the time being."
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For a more balanced approach to property investment, Mr Kusher recommends investors look to markets like Brisbane or Adelaide which currently appear to be more financially attractive, however buyers should not expect value growth to match that of Sydney or Melbourne anytime soon.
CoreLogic RP Data Report Snapshot:
Sydney and Hobart recorded the greatest annual increases in weekly rents while rents in Perth, Darwin and Canberra have dropped by -4.5%, -5.5% and -0.6% respectively.
Rents are now rising at their slowest annual rate on record across the individual capital cities over the past year, Sydney and Hobart have recorded the greatest increases in weekly rents.