Rental vacancies in Greater Western Sydney have dropped to less than 0.5% resulting in spike in rents and a backlog for tenants.

John McCormack, CEO of Starr Partners Real Estate, said demand was so strong that the company's franchisees across Greater Western Sydney were reporting tenants submitting applications for properties prior to open for inspections and were offering to pay up to $40 per week above the advertised rent.

McCormack said this attractive rental returns and lower purchase price are beginning to attract investors into the area.

 "Ongoing improvement and development work by local councils have resulted in a spike in investor demand. Investors on a budget of around $250,000 - 320,000 could purchase a two bedroom unit in Parramatta, a three bedroom villa in St Marys or a three bedroom home in Campbelltown. Average yields sit at around 5.6 - 6.2% - representing very good returns," said McCormack. 

While demand from tenants and investors is strong throughout Western Sydney, Mr McCormack said the Nepean, Macarthur and Hawkesbury districts were particularly sought after. "These areas are popular due to their relatively stable prices and comparative affordability," he said.