Asking rents for apartments in Melbourne, Hobart, Brisbane remained flat over the quarter, while in Adelaide they fell 1.6 per cent and 3.8 per cent in Darwin.

"If you build more homes, rents eventually come down or stabilise and that's now what's happened in Sydney," Domain economist Trent Wiltshire said.

"It's good news for tenants, but still at that level, Sydney is very expensive relative to other cities."

Domain is majority-owned by Nine, publisher of The Australian Financial Review.

It's a double whammy of bad news for current Sydney landlords. As well as the drop in rents, prices in the city have fallen 9.9 per cent over the year.

For those looking to invest, gross rental yields rose moderately over the year from 3.2 per cent to 3.4 per cent, as a result of prices falling more than rents.

"We kicked off a big construction boom in 2012, which is now in its last legs for Sydney with the latest ABS figures showing that apartment commencements in Sydney are down by more than half over the past year," said Pete Wargent, co-founder of property investment advisory firm Allen Wargent.


Mr Wargent said in the near-term new stock would continue to put downward pressure on rents.

"These things go in a cycle, but it forces landlords to provide a better product to compete for tenants, it frees up a bit of cashflow for the tenant which is good if they can rent for less. In the short term landlords might have to take a bit of a knock on the rent but it's not necessarily all a bad thing."

Asking rents for houses in Perth were flat over the quarter but grew 4.3 per cent annually to $365. For apartments, rents increased by 3.3 per cent – from $300 to $310 – over the three months to June.

Landlords might have to take a bit of a knock on the rent but it's not necessarily all a bad thing — Pete Wargent

"The overall economy is looking a bit stronger in Perth. Rents for houses and units have had the biggest annual increases since 2013, although rents are still down 20 per cent from where they were five years ago," Mr Wiltshire said.

Mr Wargent said while now would seem like a logical time to buy in the Perth market, he was yet to see any interest from investors.

"A lot of people talk about being counter-cyclical investors but when push comes to shove actually most people aren't."