A slowdown in rental growth is adding to strains in the housing market, prompting warnings that Sydney's residential property boom is unsustainable.

Landlord buyers have driven skyrocketing prices, especially in Sydney, but the rents they can charge to pay off their investments are not keeping up with the rapid price growth.

Sydney's property boom could be "close to its end". Credit:Glenn Hunt

The combination of surging prices and increased supply of rental properties has crunched the annual rate of return from rent that new investors make on a Sydney house to 3.4 per cent, the lowest level since 2005, figures from CoreLogic RP Data show.

After costs such as council rates and water bills, that figure is likely to be about 2.4 per cent for many investors, and it is set to fall further in months ahead if current trends continue. That compares with a return of 2.55 per cent on a one-year term deposit.