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Priced out of the city? These regional markets are your backdoor in
While property prices in capital cities have continued to rise, regional areas have been the saving grace for many investors seeking affordability and strong yields.
According to PRD chief economist Diaswati Mardiasmo, early 2026 marked a sharp turn for the property market, with back-to-back rate hikes in pushing the cash rate to 4.1 per cent amid rising inflation and mounting global uncertainty.
While more hikes have been expected, she said the impact of the 0.50 cash rate increase had already weighed on market sentiment, with the time-to-buy index dropping to 6.3 per cent, its lowest level since December 2024.
Similarly, auction clearance rates in Sydney and Melbourne eased from their 2025 peaks.
Despite the market shift, Mardiasmo said that regional markets were once again proving more resilient than capital cities, echoing COVID-19-era trends.
“Regional markets are traditionally more insulated from international migration, trade, and financial exchange (stock market); thanks to the strength of the local economy and previous investments in infrastructure and commercial builds,” Mardisamo told REB.
“With a more affordable price compared to the capital city, regional markets provide a unique and, in some ways, safer investment opportunity.”
In its report, Smart Moves: Regional Edition, PRD analysed opportunities in regional areas compared to their respective capital cities.
The report focused on affordability, sustained property growth, strong rental yields and vacancy rates, future development, and local employment conditions.
Based on the methodology, it identified 10 regional locations with more affordable median house prices than their capital cities, underpinned by strong fundamentals for sustainable growth and new ready-to-sell stock set to commence construction in 2026.
In total, the analysis found three Queensland regions: Toowoomba Regional Council, Ipswich Regional Council and Cairns Regional Council, as well as three NSW regional areas: Central Coast Regional Council, Mid-Coast Hastings Council, and Shoalhaven City Council.
Similarly, Victoria saw three regions featured: the City of Greater Bendigo, the City of Greater Geelong, and Casey City Council.
In Tasmania, only the Launceston City Council was mentioned in the report.
Across all 10 local government areas (LGAs), the analysis found that affordability below capital city prices has driven strong appeal for first home buyers and investors, while still delivering long-term price growth.
Similarly, population growth, stable or improving employment, low vacancy rates, and higher rental yields have been driving strong housing demand, supporting capital growth and rental returns while making regional areas attractive for cash flow-focused buyers.
Despite large development pipelines, new supply in each area has been insufficient compared to demand, leading to ongoing housing undersupply.
Mardiasmo said the imbalance of strong demand, limited supply, and relative affordability has positioned these regions as high-potential markets for both entry and growth.
“Interestingly, many of the previous regional markets in the 2025 report did not make the 2026 report cut because of affordability, as prices in the area have grown so much in the past 12 months.”
“These pockets of affordability in the regional market are crucial for our first home buyers and investors.”
She said pockets of affordability in regional markets allowed first home buyers and investors to enter the market with lower home loan debt than in capital cities and to benefit from equity growth or stronger rental yields.
She added that with loan commitments up about 75 per cent over the past five years, more affordable options helped reduce mortgage stress, especially in a high-interest-rate environment.
“It’s also crucial for the regions to have more investors. Not only does it assist with the rental market, but it also stimulates more housing supply, with developers knowing that there is a financial viability in building in regional markets.
“This keeps the property market growing at a more sustainable rate in the long term”
What’s next?
With more investors and first home buyers entering the market amid limited supply, Mardiasmo said there was a high likelihood that prices in these regional markets will continue to escalate.
“The next six months will see a lot of uncertainty in many markets, and no doubt, regional markets will be touched as well.”
She said that stock levels have already tightened as sellers hold back from listing their properties, concerned they may not achieve the highest possible price.
“Supply is such an issue in regional markets, especially for houses. There are many more units planned for construction, which will be the ‘saving grace’.”
Due to limited supply, Mardiasmo said buyers will likely shift their focus to units with house-level budgets, which will drive unit prices higher.
She said the shift will help buffer the market against rising interest rates and economic uncertainty, supporting capital growth and reinforcing the strength of well-selected regional markets with solid fundamentals.
“Many buyers are also uncertain, not knowing what might happen with their finances.”
“This opens up an opportunity in the market, though – in the sense that when everyone else is putting their hands in their pockets, now is the time for you to put yours out, to capitalise on less competition,” she concluded.
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