Sydney residential rental market is experiencing record shortages with median rents jumping in some suburbs by as much as 40 per cent.

According to the NSW Department of Housing, median rents in Sydney have jumped by $20 per week in 2006. The inner west, St George and Hills districts were particularly affected. For example, Auburn average rental for a one-bedroom flat rose almost 43 per cent, or $75 a week, to $250 a week.

Kogarah recorded a 30 per cent rise in the same category. Rents for two-bedroom units rose by 16 per cent in Auburn and 12 per cent in Canada Bay. Other areas recording significant rises for two-bedroom units included Baulkham Hills (11 per cent), Warringah (nine per cent) and Botany Bay (eight per cent).

For three-bedroom houses, the big movers were Waverley (13 per cent), Randwick (12 per cent) and Hurstville (10 per cent). At the market's upper end, the median rent for four-bedroom properties in Mosman increased by 20 per cent to $1500 a week.

The rental vacancy rate in Sydney has also hit a nine-year low of 1.5%. According to the Real Estate Institute of NSW – such figures are unprecedented and the situation is expected to get worse before getting better. "If it continues to spiral downwards, Sydney will have to put up the no-vacancy sign."

The situation is such that rental auctions, where prospective tenants bid for the leases on properties may become commonplace.