Canberra is pushing for a second airport in Sydney to ease the strain at Mascot, but New South Wales Premier Barry O’Farrell wants the Canberra airport expanded and high-speed trains between Sydney and the national capital.

Real Estate Institute of NSW data shows vacancies in the inner suburbs fell to 1.5 per cent, while the number of properties located up to 25km from the CBD dropped to 2.0 per cent.

Rental availability in Newcastle fell to the lowest level since last September, down to 1.3 per cent.

The Australian Bureau of Statistics latest population figures released yesterday revealed NSW had 76,700 new residents to the year ending September 2011 – an increase of 1.1 per cent.

Australians for Affordable Housing campaign manager Sarah Toohey said a vacancy rate of 3 per cent showed balance in the market.

She said households were forced to regions surrounding Sydney such as the Illawarra in search of cheaper housing.

“There are fewer opportunities for work there, and then to get into work to Sydney is much harder.

“Not only is it not good for individuals, it’s not good for Sydney,” she said.

“If your city is locking out essential service workers, you are going to come up against problems pretty quickly.

“We should be building more dedicated affordable rental properties, because rents are so high.”

REINSW president Christian Payne said it was disappointing the market had “gone backwards” in Sydney and Newcastle.

“It is unfortunate that the contraction of the rental market in both those cities last month will only make it harder for many prospective tenants to find a home,” Mr Payne said.

“Resolution of this chronic shortage in accommodation won’t be achieved in the short term.”

The REINSW February 2012 data showed Wollongong was the only major metropolitan centre in the state to record continued growth in rental vacancies, with the city’s rental vacancy rate rising 0.1 to 2.4 per cent.

Sydney mother Linda M, who asked her surname not be revealed, works two jobs but is left with just $74 a week to live on after paying rent on a modest two-bedroom northern beaches apartment.

“If it wasn’t for that I would be gone,” Ms M said.

She is reluctant to move her Year 12 daughter away from school but admits she desperately needs cheaper rent. She pays $440 a week, and earns just $514.