South-west suffers most as home rental shortage worsens

The city-wide vacancy rate had fallen to 1.1 per cent, the tightest market in six months, the institute said.

''That situation will only continue to worsen as we enter 2011, when available rental accommodation will be further squeezed by growing demand from tertiary students seeking properties,'' said the institute's president, Wayne Stewart.

Property analysts SQM Research said vacancies were tightest in the south-west.

In Bonnyrigg, the vacancy rate was 0.3 per cent in October, the lowest in Sydney. In Bankstown, the rate was 0.4 per cent and in Campbelltown, 0.8 per cent.

The managing director of SQM, Louis Christopher, said competition was increasing for the small supply of affordable rental properties in that part of Sydney.

''Most housing out there is owner-occupied,'' Mr Christopher said. ''Developers are not putting a lot of stock in these areas … because they simply don't make enough margin.''

Vacancy rates have also narrowed in inner suburbs such as Redfern, where only 0.5 per cent of rental properties were empty in October, or Newtown, where the rate was 0.8 per cent.

The government does not release specific data on vacancies but a recent Housing NSW report said rents had continued to rise city-wide. Increases were highest where vacancies were lowest.

The median rent on a two-bedroom flat in Sydney's outer south-west, which includes Campbelltown, has risen 12 per cent in the past year to $270 a week, the city's highest rise.

One Campbelltown real estate agent, who asked not to be named, said up to 30 people were attending inspections and landlords were increasingly seeking rent increases.

In Redfern, the median rent on a two-bedroom apartment has risen 9 per cent to $545 per week in the past year.

The Real Estate Institute surveys its members to determine vacancy rates whereas SQM surveys online rental listings. SQM estimates the city-wide vacancy rate is 1.2 per cent.