Can regional property continue to outshine the capital cities?

The data that broke early in 2025 showed a widening gap between our nation’s regional city markets and our capital cities’ growth.

In fact, according to Core Logic, our quarterly rolling average figures proved that it was the regions that prevented our national price movement dropping by more than the 0.3 per cent it fell to the end of January.

Capital city quarterly growth figure came in at -0.7 per cent, while the regions held up with growth of 1 per cent for the quarter.

The slowing of our hot markets of 2024, namely Perth, Adelaide and Brisbane, have contributed to this. But it would be unfair not to circle Melbourne and Sydney’s lacklustre performance as a key contributor to our national negative value.

The two biggest national cities carry a lot of weight when it comes to data points.

With Melbourne and Sydney’s population count coming in at 5.2 million and 5.3 million respectively, these two juggernauts account for 32 per cent of our national population; an enormous, combined weight in the world of property statistics.

Yet, with this underperformance, Australia’s regional markets have packed a strong punch. Some of our highest performers for 2024 have included Townsville, the Gold Coast, Rockhampton, Gladstone and Mackay.

But regional Queensland wasn’t the only star of the show. Regional South Australian markets have also outperformed, as have parts of New South Wales and Western Australia. Regional Tasmania, in cities such as Burnie and Launceston, has continued to impress too.

Many of us, me included, assumed that regional markets could correct following the Covid-driven migration from the cities to the regions. After all, the impact on a small city when 1,000 people arrive delivers a disproportionate shock compared to the same number of new arrivals into a large city.

I assumed that many would return to their cities once lockdowns ended and restaurants, sporting venues and cafes reopened. But this hasn’t been the case.

There are a few reasons for this, including the rise of investors.

First and foremost, the work from home phenomenon has changed the way we live and work.

While some of the major banks and global employers have summoned their workers back to the office, not all have requested full-time attendance. Plenty of major employers have downgraded their office space and seem comfortable enabling hybrid work from home arrangements.

Secondly, the cost of living has impacted many households’ decisions on where to live. Intrastate migration (the movement of people within a state or territory) exhibited a strength.

According to the latest data available, in 2024, Australia saw a net flow of 31,000 residents moving from capital cities to regional areas, signifying a trend of interstate migration towards regional locations, although this number is slightly lower compared to the peak during the pandemic period, according to the government’s Centre for Population.

Interstate migration cannot be ignored either. I’ve seen a growing number of interstate migrants opting to relocate to Melbourne.

Most have been younger professionals who have opted for a better value proposition than Sydney. Interstaters making Geelong and Ballarat moves have also ticked upwards over the last two years.

One noteworthy driver of regional markets, however, is investors.

With increased investor numbers and higher interest rates, savvy investors have been drawn to cities that boast higher rental yields.

This, in turn enables a lower cashflow shortfall than that of a capital city and enables an investor to target a house as opposed to a unit.

Like a capital city, regional cities have their different pockets too. Investing in a region requires accurate information, a knowledge base of the growth drivers, and great local relationships with property managers and trades.