A sharp rise in the number of homes coming on to the rental market in Australia is placing downward pressure on rental values, driving rental yields down in the process, fresh figures show.

New data from CoreLogic RP Data reveal that falling rental rates have resulted in yields dropping across the country. But the figures show that investors buying property in Australia’s capital cities can still expect to achieve an average rental yield of 3.5%, down from 3.7% a year ago.

Darwin recorded the highest yield, after recording the smallest decline of all the capitals – down from 5.8% to 5.2%.

In Hobart, rental yields have dropped from 5.3% to 5.1%, while in Brisbane they fell from 4.6% to 4.3%, and in Adelaide they are now 4.3%, down from 4.1%.

The average yield achievable in Canberra is also now 4.1%, while returns have dropped from 4.1% to 3.8% in Perth and from 3.6% to 3.4% in Sydney.

Melbourne recorded the lowest yields, down from 3.3% in March 2015 to 3.1% in March 2016.

With the number of properties on the rental market set to rise, supported in part by growth in the new build housing sector, rental supply across many parts of the country is expected to exceed demand.

“In all probability, there won’t be much scope for landlords to lift rental rates given current conditions have given greater negotiation opportunities to those in rental situation,” said Cameron Kusher, research analyst at CoreLogic RP Data.