Capital cities and regional areas: When are they worth your time?

The trend is less severe when considering units, which in capital cities see an average of 38.6 per cent growth over the last five years compared to 17.4 per cent from regional areas.

As property moves further away from a CBD, the dwelling was also found to lose capital growth; using NSW as an example, dwellings within 100 to 200 kilometres from the Sydney CBD had higher growth than those more than 200 kilometres away.

The strongest markets were mostly in NSW, with the local government areas over the last five years of Hunters Hill at 120.8 per cent and Strathfield at 114.6 per cent for houses and Forbes at 144.3 per cent and Manly at 99.3 per cent for units.

Meanwhile, the worst markets were mostly located in Western Australia and Queensland, which Mr Peleg said was mostly due to slow economies and poor population growth, with Morawa at a loss of 44.3 per cent and Derby-West Kimberley at a loss of 40.2 per cent over the last five years for houses, and Isaac at a loss of 47.9 per cent and Gladstone at a loss of 44.3 per cent for units.

“While the medium house price in regional areas is about 55 per cent lower than the median price in the capital city, the demand for houses has still been significantly stronger in capital city regions even in the past 12 months,” he said in a statement.

However, Mr Peleg said to Smart Property Investment that investors should not totally ignore regional areas but should be very selective instead. He said that there are two key factors that can tip off investors to great regional based growth:

The first is when the capital city is very unaffordable and neighbouring regional areas are affordable and have good lifestyle options.

“Prime examples of these are the Central Coast, NSW; Illawarra, NSW, and the Mornington Peninsula, Victoria,” he said.

The second is when regional areas present an “outstanding and attractive lifestyle”, citing beachside areas like Byron Bay in NSW and the Sunshine Coast in Queensland.

“Investors should not rush into unnecessary adventures in remote areas just because the market in Sydney and Melbourne have cooled as they will face needless risk and poor returns,” Mr Peleg said.