Sydney’s residential vacancy rates have fallen across the board, according to data released by the Real Estate Institute of New South Wales.

Tighter banking regulations brought in last year have lowered the number of investment properties being bought, meaning fewer properties are available for rent.

However, record levels of building approvals in recent months indicate that supply will increase significantly throughout the year and into 2017.

The February 2016 REINSW Vacancy Rate Survey saw the number of properties for rent down 0.3% to 1.7%. REINSW President John Cunningham said Inner Sydney led vacancy rate falls. “Vacancy rates in Inner Sydney fell 0.6% to 1.3%," he said.

Michael Conolly of McGrath Real Estate told 'The Australian' of growing demand for good quality apartments in inner-city suburbs. "We have just taken on 12 new properties in Darlinghurt, Woolloomooloo and Surry Hills, and we leased nine within the week," he said. "There is so much competition, no one is haggling."

Cunningham said, "Middle Sydney vacancy rates dropped 0.2% to 1.6% and Outer Sydney fell 0.2% to 2.1%.”

In other areas:

* In the Hunter region vacancy rates slid 0.3% to 2.7%, with Newcastle down 0.1% to 2.6%

* In the Illawarra, vacancy rates were down 0.8% to 1.2%

* Across regional areas, availability in the

   - Northern Rivers’ rose 0.7% to 1.4%

   - Albury rose 1.0% to 3.7%

   - Central Coast slipped 0.7% to 2.1%

   - Mid North Coast dropped 0.4% to 0.4%

   - Coffs Harbour fell 0.1% to 2.3%