Property investors in NSW are reaping the benefits of a tight rental market and poor housing affordability with rents continuing to surge.

The latest data from Housing NSW showed rents in NSW had jumped by 10.3% in the September quarter compared to a year ago. The median rent in the state is now sitting at $320 a week - a 3.2% rise over the three months ending September.

Botany Bay racked up the biggest jump of 35.4% in median rent to $325 per week for one-bedroom units over the quarter. Over the past 12 months, the suburb posted a whopping 42.9% rental growth. Two-bedroom units also performed well in the suburb with rents climbing by 24.1% annually.

Canada Bay saw the fastest quarterly growth for a three-bedroom house where median rent rose 10% and 22.2% on an annual basis. In regional areas, Wagga Wagga notched up a 15.2% increase in the average cost of rent for a two-bedroom unit.

Craig James, chief equities economist with CommSec, said that while housing prices have softened in recent months, they remain well up on levels of three or five years ago.

"In NSW, the modest drop in housing prices, combined with soaring rents, lower interest rates and rising population, will lead to stronger demand for property. Investors will also become more attracted to property as interest rates fall to historic lows," James said.