The change from Level 2 to Level 1 water restrictions is expected to take place on March 1 to give ensure water quality has improved after the bushfires.

The Illawarra, Sydney and the Blue Mountains were placed on Level 2 water restrictions on December 10 due to declining dam levels and the ongoing drought.

Minister for Water, Property and Housing Melinda Pavey said Level 2 restrictions will remain in place for two more weeks.

"We recently experienced the biggest rain event in 20 years, which has impacted the quality of raw water in Greater Sydney's bushfire affected catchment," Mrs Pavey said.

"A number of initiatives are in place to ensure the water is safe for use, including extensive testing, filtration and nets to catch debris, but we are allowing an extra two weeks purely as a precautionary measure."

After last week's downpour, Warragamba Dam is currently at 80.3 per cent capacity, up almost 20 per cent from last week, while Cataract Dam is at 72.1 per cent, Woronora Dam at 63.6 per cent, Cordeaux Dam at 73 per cent and Avon Dam at 87.2 per cent.

Under Level 1 water restrictions, residents and businesses are not able to leave hoses running unattended, wash vehicles and buildings with a hose that isn't fitted with a trigger nozzle, or use standard sprinklers and watering systems at any time.

Fines will still apply for breaches of water restrictions - $220 for residential breaches and $550 for businesses. Exemptions will be available for non-residential customers with outdoor water use as their core business.