Trust account fraud has become a growing problem for the NSW property industry, with 10 real estate agents prosecuted and revoked of their licences since September 2014.

The practice has prompted a raft of new regulations to be introduced by the government, amid a stream of wider reforms to the real estate and property sector due early next year.

"Trust account fraud in the real estate industry has a devastating effect on victims, some of whom have had hundreds of thousands of dollars stolen by rogue agents," said NSW Minister for Innovation and Better Regulation Victor Dominello.

"The changes announced by the NSW government will ensure that consumers are better protected, industry standards are lifted and funds given to agents in trust are properly managed."

Five real estate agents have been prosecuted for real estate fraud in NSW this year, including Alan Temelkov, who failed to deposit funds in a trust account, instead spending the money on business expenses and gambling.

Temelkov was convicted of seven offences under the Property Stock and Business Agents Act and handed 18 months imprisonment, to be served in the community.

He was also ordered to pay more than $235,000 in reparation for his offences, which forced sellers to apply to the Property Services Compensation fund for restitution.

During the last financial year, the fund has paid out nearly $2.4 million in response to consumer claims, and in the previous year it was more than $3.1 million.

Currently there is no due date or deadline for agents to transfer rental income to a landlord, meaning that issues are only raised when a landlord requests money that is owed and the agent fails to comply.

Often by the time this happens there is a substantial amount of money owed.

Fair Trading is also limited in the current act, as licences and certificates of registration can only be suspended after a potentially lengthy investigation process.

However, under the changes to be introduced next year, agents will be required to transfer rental income to landlords at the end of each month and to hold separate trust accounts for rent and sales money.

In addition, NSW Fair Trading will be granted a new power to temporarily suspend a licence or a certificate of registration while an investigation is under way.

"The changes to disciplinary powers are about stopping rogue agents quickly and better protecting consumers in what's likely to be the biggest transaction in their lives," said NSW Fair Trading Commissioner Rod Stowe.

In September, NSW real estate agent Daniel Nicholson was prosecuted after he failed to lodge almost $93,000 in trust funds, which he converted for his own use.

Mr Nicholson, 39, was the sole director of Nicholson Property Group Pty Ltd, trading as the Collaroy-based Kings Northern Beaches.

Other examples of how defrauded trust funds have been used include one agent who fraudulently used the funds to purchase illegal drugs used by his wife, and another whose father reported her to Fair Trading after she stole more than $1.5 million from her real estate agency to use on poker machines.

Gambling addiction is identified as a common motivator for trust account fraud, as was the case for one agent who bet $77,000 of trust funds in one day.

Mr Dominello said increasing the power of Fair Trading would allow the regulator to "swiftly intervene to prevent trust account fraud".

Real Estate Institute of NSW president John Cunningham said that any controls to ensure the security of real estate funds were welcome.

"At the same time we want to make sure these powers are not abused by Fair Trading and that there are clear guidelines. We will be very involved in producing guidelines to ensure there is adequate consumer and practitioner protection."