Regional property price growth slows as city exodus abates

Regional property markets around Australia have over the past year outpaced the capital growth rates of their corresponding state capitals but sentiment is now shifting back towards the cities.

Investors have been drawn to higher rental yields and property price growth in regional areas.

Rental yields are higher in each state’s regional market compared to the respective capital, while over the past 12 months Hobart stands alone as the only capital city to (narrowly) eclipse its state’s regional market in terms of price gains.

But over the course of the past three months a very different picture has emerged.

Only regional Victoria and Tasmania surpassed the price gains of Melbourne and Hobart over the past three months.

In August, that pattern was even further entrenched. Sydney, for example, lags regional New South Wales in dwelling value gains over 12 months (2.1 per cent compared to 3.8 per cent) but last month Sydney’s price gains were four times greater than its regional counterparts (0.8 per cent against 0.2 per cent regionally).

Queensland and Western Australia’s regional markets are still delivering some enormous annual growth rates.

Among the fastest growing markets are Central Queensland’s Biloela, up 19.1 per cent to a median price of $345.616, and Central Highlands (16.8 per cent, $371,090), Western Australia’s Midwest (18.7 per cent, $501,515) and Albany (18.4 per cent, $650,379), the Lower Murray area in NSW (16.6 per cent, $355,012). Mildura was Victoria’s clear standout, with 15.5 per cent price growth over the past year to a median dwelling value of $488,302.

Affordability was central to the performance of regional property markets. Of all the states’ best performing regions, with almost all have a median price below $700,000. None had a median value above $1 million.

Across all of Australia’s regions WA’s East Pilbara recorded the strongest annual growth in net internal migration during the 12 months to June 2025.

Chris Hinchliffe, Director, Herron Todd White, said that with a sustained shortage of new housing supply, property owners tend to be favouring older houses in need of renovation rather than building new ones, primarily due to the high construction costs coupled with the skilled labour shortage in regional Western Australia.

“In the $600,000 to $800,000 price bracket, buyers are also finding value in older homes on larger allotments, often in original condition.

“These properties not only provide scope for immediate improvement but also hold strong potential for capital growth due to their generous land size, development potential, and location.”

Fewer city-dwellers drawn to regions

Regional populations have generally been on the rise but the Commonwealth Bank’s June 2025 Quarter Regional Mover Index (RMI) released Monday (8 September) showed that Australians may be cooling on regional relocation.

“The flow of capital city people moving into Australia’s regions fell to its lowest level since the December 2019 quarter,” the report noted.

“The RMI, which tracks migration from capital cities to regional areas, fell by19.3 per cent in the June quarter of 2025, reaching a level that is 16.5 per cent lower than a year earlier.

“Migration from Australia’s capitals to the regions has remained high since the onset of the pandemic.

“It’s unclear whether the latest quarterly result represents a break in this trend or is due to wider factors affecting mobility across all of Australia, however, despite this downward trend, the direction of relocations continues to favour the regions.

“Many more Australians continue to move from capital cities to regions (11.2 per cent of all movements) than from regions to capital cities (8.9 per cent).”

The Sunshine Coast returned to the number one spot for net migration to Australia’s regions in the year to June 2025, accounting for 7.4 per cent of all net migration from capitals to regions.

After taking the lead in the March quarter, Greater Geelong has slipped back to second place.

Both LGAs continue to gain significantly more population from the capitals than from other regions. This is also the case for Lake Macquarie in third place. Maitland in New South Wales and Fraser Coast in Queensland rounded out the top five LGAs for greatest net internal migration.

These LGAs are experiencing a more even split of net migration from both capitals and other regions. Consistent with the decline in mobility overall, all five LGAs experienced lower net migration in the June quarter than the March quarter.

In the June 2025 quarter Sydneysiders accounted for 60 per cent of the net outflow from all of the country’s capitals into regions; Melburnians accounted for 35 per cent.

Cotality economist Kaytlin Ezzy said some regional markets had peaked during 2022 when interest rates started to rise from their emergency levels.

Regional markets that have reached their record levels are regional NSW, Queensland, South Australia and Western Australia. Victoria regional is 4.8 per cent below its peak, while Tasmania is 1.7 per cent off its highest level and regional Northern Territory off by 8.5 per cent.

“This is when that availability of money really dried up,” Ms Ezzy said. “And also around the time when we started to see people shift back to the capitals.

“That saw some of these markets that had seen exceptional value growth over the first couple of years of Covid start to shift a little bit lower, as what was a slightly overvalued market shifted towards more realistic prices.”